Breakthrough Innovations and Appropriability Strategies: Three Essays Based on The Queen's Award for Innovations

Drawing on a sample of 1383 innovations which won a Queen’s Award for Innovation between 1976 and 2017, we aim to examine innovation level appropriability strategies both within and outside of the patent system. This study is motivated by the general lack of empirical research on the identification, validation and analysis of breakthrough innovations beyond the use of patents and patent data. The first essay introduces a method to identify commercially successful breakthroughs within a broad sample of patents. We define a binary measure of patent value based on the Queen’s Award for Innovation and we test the ability of five popular patent-based indicators to correctly classify patents against our measure. We select the best model following a Decision Curve Analysis, a method for the evaluation and comparison of prediction models which enables us to assign different weights to the consequences of a misclassification. Once identified the most suitable specification, we estimate an out-of-sample prediction to find breakthrough innovations within a comprehensive set of patents filed by GB applicants over the past forty years. Results show that breakthrough innovations tend to be clustered in time and sectors. Our analysis highlights that in the UK over the past 20 years, breakthrough innovations emerged predominantly from the field of electrical engineering. Relevant robustness checks support the validity of our method. The second essay provides new evidence on the way firms design appropriability strategies at the product innovation level. We investigate the use and the perceived effectiveness of different appropriability mechanisms in the specific case of radical innovations. We observe that firms consistently combine formal and informal IP to prevent imitation and their strategy may vary depending on the innovations' development phase. Our results also support the broad stream of literature finding informal appropriability mechanisms to be more effective than patents in several economic contexts. Finally, the third essay explores the relative importance of patents and secrecy at the product innovation level. There is a growing tendency in the literature towards considering these mechanisms as complements rather than substitutes. We are interested in testing how the relative importance of patents and secrecy changes depending on a set of product-related factors. To achieve a more realistic and detailed understanding, we analyse this relationship separately depending on the phase of the product development process. Our findings show that the temporal dimension affects the design and effectiveness of different mechanisms, with secrecy being consistently more effective in the early development phases. Patents tend to be considered more important during the commercialisation and in general when a product requires external funding. Product complexity emerges as a substitute for patents and it increases the probability that firms adopt secrecy. Internal and external sources of knowledge have contrasting effects.