Property rights as a complex adaptive system: how entrepreneurship transforms intellectual property structures

Abstract

This article aims to provide some elements of an evolutionary theory of property rights. It applies a systems-based capital-theoretic perspective to explain the formation and transformation of property rights structures. The approach emphasizes how entrepreneurs create capital combinations by connecting capital goods—defined widely to include property rights, such as patents—in their production plans. Their actions change complementarity relations between property rights as used in production. We treat the property rights structure as a complex adaptive system that exhibits increasing structural complexity as it evolves. Entrepreneurs discover gaps in the property rights system. As they organize production to exploit profit opportunities, entrepreneurs regroup existing intellectual property rights (IPR) into new modules, such as patent pools, that encapsulate more complex combinations of basic building blocks of intellectual property. A patent pool constitutes an interpolation of a new meso level within the macro IPR structure. We apply our framework to the first of the patent pools for digital video compression technology used in digital television and DVDs.

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Notes

  1. 1.

    This article is a shorter version of a chapter appearing in Foster and Pyka (2014). See that chapter for additional material on the connections between evolutionary economics and the law & economics approach to property (Harper 2014).

  2. 2.

    Limiting property rights to a small closed class of well defined types results from the legal principle of numerus clausus, which is Latin for “the number is closed” (Merrill and Smith 2000: 9–11).

  3. 3.

    The classification of rules in this paragraph draws upon Ostrom et al.’s (1994) study of rules and common-pool resources. See too Wilson et al. (2013).

  4. 4.

    See Harper (2014) for discussion of how Blu-ray technology has increased the complexity of the network of patent pools for digital video optical media.

  5. 5.

    The “economics jury” is still out when it comes to determining the empirical effects of patent pools on innovation (i.e., whether patent pools encourage or inhibit innovation). For any given patent pool, the effects on innovation will depend, among other things, upon the specific content and structure of the rules of organization that form a particular pool and the institutional and historical details of the relevant industry at the meso-level. See Flamm (2013) and references therein.

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Correspondence to David A. Harper.

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Harper, D.A. Property rights as a complex adaptive system: how entrepreneurship transforms intellectual property structures. J Evol Econ 24, 335–355 (2014). https://doi.org/10.1007/s00191-014-0345-9

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Keywords

  • Property rights
  • Entrepreneurship
  • Complexity
  • Economic organization
  • Capital
  • Patent pools

JEL Classifications

  • B52
  • B53
  • D02
  • D23
  • D24
  • K11
  • O34
  • P14