Concealing or revealing? Alternative paths to profiting from innovation

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Summary, in English

One stream of research states that closed innovation and knowledge concealing is imperative for firms seeking to profit from innovation. Another stream of research states that firms can enhance innovation outcomes by means of openness and the selective revealing of knowledge. To contrast these two streams of research, we offer a comparative analysis of under what conditions firms should conceal or reveal knowledge in order to profit from innovation. We ague that firms profit from concealing and revealing knowledge depending on the presence of industry-level network effects and imitation risk as well as firm-specific factors such as their position within the network of firms, their knowledge-base, and the ability to prevent imitation through complementary assets and patents. The novelty of our framework consists of addressing the effect on firm profits as opposed to the effect on innovation outcomes. Further, we build a multi-level model of relevant conditions in term of both industry- and firm level factors, taking into account how the potentially countervailing effects of value creation and appropriation unfold over time. This allows us to separate the different economic mechanisms by which particular conditions affect the financial impact of revealing or concealing knowledge.

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