Description :
For both manufacturing and service sectors, key success factors for firms to grow are implementing innovations and acquiring the returns from the innovations. The innovator’s capability of getting the returns from his innovations is called “appropriability of innovations.” The purpose of this paper is to discuss the issue of appropriability of innovations by examining the specific example of Canon Corporation of Japan. When any innovation is successfully implemented, spillovers from the innovation are inevitable in most cases, and invite free riders. In other words, an innovator alone cannot monopolize the returns from his/her innovation. Thus, it is important to minimize the spillover, which ultimately improves the appropriability of innovation.For example, two manufacturers which have roughly equal product market shares and compete head to head may show different profitability if one has a key device and the other does not. Sharp Corporation’s high profitability in the business of liquid crystal display TVs is a case in point. Its profitability is estimated to be higher than Sony’s, for example, because Sharp possesses the liquid crystal display technology and manufactures in-house, while Sony does not.
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