Managing intellectual property: a strategic point of view

Pages366-374
DOIhttps://doi.org/10.1108/14691930210448305
Publication Date01 Dec 2002
AuthorMichele Smith,Frederick Hansen
JIC
3,4
366
Journal of Intellectual Capital,
Vol. 3 No. 4, 2002, pp. 366-374.
#MCB UP Limited, 1469-1930
DOI 10.1108/14691930210448305
Managing intellectual property:
a strategic point of view
Michele Smith
Applied Strategic Technologies, Inc., Minnesota, USA, and
Frederick Hansen
Department of Organizational Development, Cappella University
Graduate School, Minneapolis, Minnesota, USA
Keywords Intellectual capital, Intellectual property, Business strategy, Core competences
Abstract In the new knowledge economy, intellectual property has become an important
strategic issue. However, in many firms, the management of intellectual property (IP) is still
divorced from business strategy. People still think that ``managing IP strategically'' means having
an IP strategy rather than managing IP according to business strategy. We argue that intellectual
property is strategic only to the extent that it links to the firm's core capabilities and that not all
intellectual property is core to business strategy. We present a model for identifying the function
of intellectual property in a firm's business strategy and present specific recommendations for
protecting, valuing and generating IP from a strategic point of view.
Introduction
Everyone knows (or should know) that in the new knowledge economy,
intellectual property (IP) has to be managed strategically. Yet firms still use
generic IP valuation methods (e.g. citation analysis, see Barron, 2000) that are
independent of the firm's strategy. IP growth is still not adequately represented
in a firm's financials or, more importantly, its stock price (Morgan, 1998).
People still think that ``managing IP strategically'' means having an IP strategy
rather than managing IP according to business strategy. If IP is important to
business strategy, should not the business strategy inform the management of
IP? If IP is a strategic issue, should not some IP be more strategically relevant
than other IP? If some IP has a greater relevance to strategy, should it not also
have a greater value? We believe that in order to manage IP strategically,
business leaders need to look more closely at how IP fits into the firm's specific
business strategy. This article examines IP's new strategic role in the new
knowledge economy and presents a new approach to managing IP
strategically.
Strategy in the new economy
There are a lot of changes that get subsumed under the rubric of ``the new
knowledge economy''. In the new knowledge economy, sustainable competitive
advantage is a function of learning and knowledge more than market share or
segmentation (Porter, 1996; Evans and Wurster, 1997). Products are
differentiated by intellectual capital ± i.e. ``how smart they are''± rather than by
their tangible features (Stewart, 1999). In addition, firms are outsourcing more
(Quinn, 1992), traditional barriers to entry are falling away, industry
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