Class 17: Strategies for protecting innovation profits
Coming up with that one home run—a blockbuster in pharmaceuticals, say—is one thing. Maintaining the profits from it or coming up with another blockbuster may be quite another. Chapter 12 suggests three generic strategies for protecting entrepreneurial rents. The case of Intel and Sun provide an excellent example of what strategies (block, run and team-up) may be pursued and when.
Reading: Chapters 12, and " Can Andy Grove keep profits up in an era of cheap PCs?" Business Week, December 22, 1997. Pages 70-77.
Case: Merck (A) and Merck (B) cases
For the readings: (1) Are Intel's actions as detailed in the Business Week case consistent with its block and run strategies of the textbook?
For the cases: (1) Why would Merck want to cannibalize its Mevacor given the tight appropriability normally associated with pharmaceutical products?
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