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2003 Documento de Trabajo #168

Strategies That Work When Property Rights Don

In many sectors property rights over knowledge and information are weak as they are embodied in employees, competitors can copy or customers can pirate. Yet comprehensive studies show that firms systematically invest in these assets. We offer a simple taxonomy of strategies that firms use to cope with weak property rights. We classify these strategies in three groups: (i) Some firms threaten offenders with strong competition. (ii) Other firms exploit complementarities and offer potential offenders a better deal than they can get elsewhere. (iii) And yet other firms exploit weak property rights and make profits on complementary assets or products that they can own.  We go beyond taxonomy by showing when a particular strategy works. It depends systematically on the characteristics of both the asset and the investing firm. Key words: complementarities, firm scope, holdup, piracy, weak property rights.

JEL Classification: L23, O31, O32, O34.

Bharat Anand
Alexander Galetovic

Publicado en: Por aparecer en: Gary Libecap (ed.) Advances in the Study of Entrepreneurship, Innovation, and Economic Growth, JAI Press

Keywords: complementarities, firm scope, holdup, piracy, weak property rights