This paper analyses how firms' degree of openness and innovativeness
influence their use of formal and informal appropriation mechanisms.
Patents, trademarks, copyrights, and design rights are formal
appropriation mechanisms. Secrecy, lead-time, and complexity are
examples of informal appropriation mechanisms. Both external search
breadth and depth are positively associated with firms' use of informal
appropriation mechanisms, while only external search breadth is
positively associated with formal appropriation mechanisms. Firms'
degree of radical (incremental) innovation orientation is negatively
(positively) associated with their use of formal appropriation
mechanisms. Analysis of the joint impact of openness and innovativeness,
suggests that for radical innovators it is external search breadth
(rather than depth) that has a positive association with the use of
informal appropriation mechanisms. In contrast, for radical innovators
external search depth (rather than breadth) is associated with the use
of formal appropriation mechanisms. For incremental innovators, external
search breadth (rather than depth) is associated with the use of both
formal and informal appropriation mechanisms.
Keywords: Appropriation Mechanisms, Formal Appropriation, Informal Appropriation, External Search Openness, Incremental Innovators, Radical Innovators
JEL Classification: O34, O31, O32, K11