Uncertain intellectual property conditions and knowledge appropriation strategies: Evidence from the genomics industry

Abstract

Innovating science- and technology-based firms often endure a sustained period of uncertain intellectual property rights (IPR) protection before patents could be granted to their valuable knowledge assets. This problem is exacerbated, as firms increasingly develop their innovations or operate in countries with weak IPR institutional environments. But how does IPR uncertainty affect firms' strategy toward knowledge appropriation-capturing of economic value from their knowledge assets-and toward providing access to these knowledge assets? Drawing on research from the economics of science and intellectual property strategy, we examine this question using a novel panel data covering 362 firms and organizations in the knowledge-intensive genomics industry based on all genomics patents and matching papers from 1988 to 2005. We find that under uncertain IPR conditions, firms reveal and accumulate more knowledge through open science (follow-on publishing) but shift to knowledge appropriation through commercial science (follow-on patenting) when IPR uncertainty is narrowed. This effect is most salient when firms develop their knowledge assets or operate under strong IPR institutional regime. For highly science-based knowledge assets, firms continue tapping into open science for access and reciprocity in knowledge acquisition from the scientific community. These findings highlight the role of patent grant as a potential lever to shape firms' knowledge processes and long-term innovative capacity, and the emergence of a concerted "science strategy" employed by firms.