Innovation Outside Firm Boundaries: A Real Options Perspective on Appropriability, Commercialization Strategies and Firm Performance

This dissertation focuses on the conditions under which innovating firms may employ external commercialization strategies to appropriate value from their innovations and enhance firm performance. Specifically I examine the relationship between appropriability conditions of intellectual property protection, complementary assets and uncertainty, and the firm’s decision to commercialize innovations externally. Applying real options theory to a firm’s innovation strategy, I hypothesize that external commercialization strategies mediate the effect of appropriability conditions on firm performance. Hypotheses tests are conducted on a sample of more than 1600 firms and 300 external commercialization agreements in the manufacturing sector. Notwithstanding the overall lack of support for these hypotheses, there remains potential for making a contribution to the innovation literature. First, the integration of real options theory and the appropriability framework offers a theoretical extension of both literatures. Second, results of post-hoc tests indicate that some relationships do exist and further investigation is warranted.