How to oppose imitation in the Dutch advice-

Protecting Easy-to-Imitate Innovations

How to oppose imitation in the Dutch advice-

& engineering sector

Wolvega, December 2004

Innovation and Imitation

to boldly go where no one has gone before however,

one sheep follows another

Name: drs. Geert Jan van Dam University: University of Groningen Supervisor: dr. G. Gemser

Address: Kraaiheide 28, 8471 TZ, The Netherlands

Abstract

This Master thesis comprehends a research into effective protection mechanisms for easy-to-imitate innovations (ETI-innovations). Innovations can be characterized by the words “something new which is presented in such a way that the value is determined by the selectors” (Wijnberg 2004). Innovation is value creation. However, after the value has been created, it has to be protected against competitors who will imitate successful innovations. Value protection is considered necessary to prevent innovators from imitation by competitors, since imitation can harm the profitability of the innovator.

Without the possibility to protect the value underlying an innovation, a firm is tending less towards innovation. This Master thesis examines the possibilities to protect ETI- innovations against imitation in the Dutch advice- & engineering sector described in the following research question:

By which means can a firm effectively protect value from easy-to-imitate innovations and how do these means differ from means used to appropriate

value from not-so-easy-to-imitate innovations?

There have been a number of studies to the means of protection of technical innovations;

most of them are non-easy-to-imitate innovations (NETI-innovations). In addition to the studies to means of protection suited for NETI-innovations, means of protecting suited for ETI-innovations have recently acquired more attention. The most important conclusions resulting from the studies to ETI- and NETI-innovations are:

-

There seem to be differences between the means of appropriability and their perceived effectiveness between NETI- and ETI-innovations.

-

There seem to be differences between the different industries, and their means of protection and their perceived effectiveness for ETI-innovations, as well as for NETI-innovations.

-

There seem to be differences between the different countries, and their means of protection and their perceived effectiveness for ETI-innovations, as well as for NETI-innovations.

-

Authors agree that firms rely upon more than one mechanism to protect their innovations for ETI-innovations, as well as for the NETI-innovations.

-

Informal means of protection are more important than formal means of protection for ETI-innovations, as well as for most NETI-innovations.

A qualitative oriented research has been executed, focusing on the protection means in

the advice- & engineering sector and their perceived effectiveness. The respondents all

agreed that innovations in the advice- & engineering sector are easy-to-imitate and are therefore justifable research objects in the sense that the innovations in the advice- &

engineering sector are easy-to-imitate.

The respondents agreed that a high imitation grade in the advice- & engineering sector exists. Therefore, the respondents refer to several means of protection for ETI- innovations to secure the profitability of an innovation. According to them there are 8 means of protection, from which half of them is revealed by more or far more than the majority. Most often identified are: superior marketing, secrecy, tacit knowledge, and

‘cooperation with’. The other means of protection mentioned, although less than the 4 already mentioned, are: creativity, financial protection mechanisms, formal mechanisms, and lead-time. In addition, the 4 means of protection brought up most often, are in general perceived more effective than the protection mechanisms mentioned by fewer than the majority. Superior marketing is perceived as the most effective, followed by tacit knowledge.

The main conclusions of this Master thesis are:

-

Informal means of protection are perceived more present and effective than formal means of protection, to protect innovations in the advice- & engineering sector. This is in correspondence with earlier research.

-

The means of protection, which are perceived effective in most or even all sectors, are: marketing, secrecy, financial protection, and cooperation with e.g. suppliers.

Tacit knowledge depends on the nature of a product or process.

-

The most effective means of protection firms in the advice- & engineering sector can possibly use are: superior marketing, tacit knowledge, and secrecy.

-

Cooperation with e.g. suppliers is an effective instrument to implement superior

marketing, tacit knowledge, or secrecy.

Preface

This Master thesis means the completion of my study ‘Master of Science in Business Administration with the specialty Strategy & Innovation’ at the University of Groningen.

It deals with effective means of protection for easy-to-imitate innovations. During the writing of my Master Thesis, several circumstances delayed the completion of my Master Thesis, such as getting a job, and some other attractive projects which crossed my path.

Nevertheless, I am glad that I managed to finish my Master Thesis.

Several people supported me while writing my Master Thesis. I especially want to thank all respondents for their efforts, knowledge and suggestions, particular Mr J. Zegwaard, Business Unit president of Oranjewoud. He offered an important amount of potential respondents. This helped me to do a thorough investigation in the advice- &

engineering sector. In addition, I want to thank my supervisor, Dr. G. Gemser for her support and useful suggestions during the whole project. Her criticism and suggestions supported me to reach a higher level of quality. Last, I want to thank Evie Walsma, who helped me audit the text.

I hope that my Master Thesis contributes to “the protection of innovations in the Dutch advice- & engineering sector” and in more general terms, “that it provides more insight in the protection of easy-to-imitate innovations”.

Wolvega, December 2004

Geert Jan van Dam

“Nulla tenaci invia est via”

Table of contents

1. Introduction 7

1.1 Innovation and Imitation 8

1.2 Research Questions 9

1.3 Research Approach 9

1.4 Case Study 10

1.5 Overview of the Paper 12

2. Value Protection 13

2.1 Definitions 13

2.2 Imitation 14

2.3 Means of Protection 15

2.4 ETI-innovations 22

2.5 Summary & Conclusions 25

3. Research Framework 28

3.1 Method of Research 28

3.2 Sample 29

3.3 Method of Analysis 30

4. Research Results 31

4.1 Results concerning imitation 31

4.2 Results concerning protection mechanisms 33 4.3 Effective perceived protection mechanisms 38

4.4 Summary & Conclusions 39

5. Conclusions & Recommendations 41

5.1 Conclusions and Future Research 41

5.2 Managerial Implications 44

References 46

Appendices

Appendix A: Interview Guideline

Appendix B: Background information Respondents

1. Introduction

Nowadays in the knowledge-based economy, innovation is an important cornerstone of the economic welfare of a country “when more of the same isn’t enough” (SwarniPersaud et al. 2003). Innovativeness is important to compete on a worldwide scale.

Innovation and gaining the economic returns of an innovation are indissoluble connected, or as Gemser (1999) states: “can be considered as two sides of the same coin”. A firm will and can not create value by doing investments without securing appropriability (e.g.

Arrow 1962; Levin et al. 1987). Concerning the value of an innovation, it is possible to distinguish three activities or characteristics: value creation in the eyes of the selectors, value capturing from the marketplace and value protection against competitive imitation (Foss 2003; Mol & Wijnberg 2003).

Value creation is “the contribution to customer utility of the final good” (Bowman &

Ambrosini 2000). Bowman & Ambrosini (2000) state that value capturing is “the difference between revenue and cost”. Mol & Wijnberg (2003) state: “the price that is paid by the final customer can be seen to represent the total amount of value capture that is distributed over all the stages of the value system”. This means that value capturing is a vertical competitive activity between an innovator and its clients and suppliers in the industry column. In this respect, it is important to mention some work of Teece (1986). He has investigated the question: “why innovating firms often fail to obtain significant economic returns from an innovation, while customers, imitators and other industry participants benefit”. According to Teece, imitators, besides customers and suppliers, determine the share of profits for the innovator. Because imitation caves in pieces the profits of an innovation, an innovator is hurt not only by vertical competition but also by horizontal competition.

Value protection is the activity directed at the imitators to diminish the crumble off of the profit by imitators.

The appropriability of economic returns from innovations embraces value capturing and value protection (Harabi 1995). This Master thesis focuses on value protection of easy- to-imitate innovations

(ETI-innovations) in the advice- & engineering sector.

1 www.innovatieplatform.nl

2 Horizontal competition is competition between companies in the same stage of the value chain.

3 Easy-to-imitate innovations are innovations wherefore formal means of appropriation are very few effective in contrary with NETI-innovations wherefore formal means of appropriation are more effective (see also § 2.1).

First, the concept of innovation and the protection of innovations is discussed (§ 1.1) followed by the research questions (§ 1.2). Paragraph 1.3 discusses the research approach. After that, the case study is discussed (§ 1.4). Ultimately an overview of this Master thesis is presented (§ 1.5).

1.1 Innovation and Imitation

According to Wijnberg (2004), “an innovation is something new which is presented in such a way that the value will be determined by the selectors”. In other words, in his opinion, something constitutes an innovation when it is new and the selectors of the innovation recognize the new value of it. The selectors are the actors in a selection system

who are selecting (Wijnberg 2004).

In his definition, Wijnberg (2004) lacks to define the word ‘new’ (Clement et al. 2003), which happens more often (Gemser 1999). According to Levitt (1966), innovation may be viewed from two points: “(1) newness in the sense that something has never been done before and (2) newness in that it has not been done before by the industry or by the company now doing it”. In this Master thesis, the definition of newness is something that has not been done before by the industry. Newness in the sense that something has never been done before is too difficult to use in a study of this size. When the company does something new for itself, but it already exists in the industry, then it is not innovation but imitation (Levitt 1966). According to Levitt: “when other companies in the same industry subsequently copy the innovator, even though it is something new for them, then it is not innovation; it is imitation”. In other words, imitation is copying the innovator, assuming the imitator operates in the same industry as the innovator. Levitt (1966) mentions the garment industry as an example of an industry in which it is easy- to-imitate. In Levitt’s eyes probably “the most obvious industry of such ones”.

When an innovator wants to reap the profits of its innovation it has to protect itself against imitation. This Master thesis examines how ETI-innovations can be protected against imitation, particular in the Dutch advice- & engineering sector. ETI-innovations are analyzed more in-depth in paragraph 2.4.

4 A selection system is “an economic framework precisely in the sense that it starts off with an economic conception of value as something which can only be established in the context of particular sets of preferences; at the same time it is a framework suited to organizational theory because it views the process of value creation as a process in which different actors, individuals, and organizations interact and attempt to influence each other” (Wijnberg 2004).

1.2 Research Questions

The main research question of this paper is:

By which means can a firm effectively protect value from easy-to-imitate innovations and how do these means differ from means used to appropriate

value from not-so-easy-to-imitate innovations?

This paper investigates effective means to protect value from ETI-innovations. In this paper, effective refers to those means of protection that limit imitation to such an extent that the profits of the innovators increase. Subsequently the efforts into the mean of protection must be less than the extra gains it yields. The higher the net-profit (the extra gains minus the efforts) the more effective a mean of protection is. Although it is not likely that the respondents come up with figures, it must be possible for them to estimate which are the most effective means of protection from this point of view.

To answer this research question, we distinguish the following sub questions:

ƒ What are ETI-innovations?

ƒ What are the most effective means to protect the value of non-easy-to-imitate innovations (NETI-innovations)?

ƒ What are the most effective means to protect ETI-innovations and do these means differ from NETI-innovations?

1.3 Research Approach

This thesis uses an explorative research approach written in the IMRAD form.

The IMRAD format implores that the paper will have an hourglass structure (as depicted in figure 1). The Master thesis starts with a theoretical framework, which gradually examines the topic in depth; then a case study is provided, followed by conclusions and recommendations. The conclusions and recommendations not only refer to the case study but are also formulated in a way to allow for generalizations (whenever possible).

5 More on the IMRAD form can be found on the internet at www.wisc.edu/writing/handbook/

ScienceRapport.html.

1.4 Case Study

I performed a case study within the advice- & engineering sector. The reason therefore is twofold. The first is the character of advice & engineering services. These services are easy-to-imitate (Knight & Wendling 2002) and therefore a good example of ETI- innovations. The second reason concerns previous research executed by the researcher in the advice- & engineering sector on value creation (Van Dam 2003). I executed a qualitative research to discover essential success factors for the innovation process in the advice- & engineering sector and to discover methods that accelerate the innovation process. One of the main outcomes was that the essential success factors are partly corresponding with essential success factors for other services as professional services or financial services, but there are also distinctions between them. In short, we can distinguish two sorts of success factors: structural and process. Table 1 provides some of the results of that study.

The structural success factors are necessary during the whole development process and process success factors play a role at a particular stage. After the creation of value, discussed earlier, this Master thesis investigates the protection of the created value of an innovation in the advice- & engineering sector.

Figure 1: hourglass structure of the paper

Theoretical Framework

Case Study

Conclusions and Recommendations

Table 1: Results from the study of Van Dam (2003)

Structural success factors Process success factors A formal development program Creativity

Involvement of diversity of disciplines Qualitative Market Research Money is not allowed to be limited Use of Marketing

Customer references Focusing

Employees’ capabilities

Innovative Image

1.4.1 Advice- & Engineering sector

The Advice- & Engineering sector consists of several important players in the Netherlands. The biggest is Arcadis, followed by DHV, Royal Haskoning and Oranjewoud BV.

These are players with a large variety of products and services with respect to all market segments. Besides them, there are many players which focus on a specific market segment or even on a specific product or service.

1.4.2 Oranjewoud BV

The case study is executed within Oranjewoud BV. The reason therefore lies in two important aspects. First, Oranjewoud is one of the largest players and provides all services the advice- & engineering sector asks for. In addition, innovation is a very hot topic within Oranjewoud. Oranjewoud BV wants to provide high-quality services at the top range of the market and does not want to compete on prices. Therefore, constant improvement is needed. Oranjewoud consciously started a way in which innovation is a key issue by erecting an innovation platform. This innovation platform consists of a team of employees with different backgrounds such as finance, engineering, law and marketing. The innovation platform supports the development process of innovations.

Depending on the magnitude and impact of an innovation, the innovation platform supports people during the development of an idea into an innovation or, when an innovation has a very high impact or is very complex, it will look after the whole innovation process (from idea and design to commercializing) themselves. In addition the innovation platform always has a decisive role in whether an idea is turned into an innovation or not. This is in correspondence with the results of earlier research by the investigator which suggest that a company should focus on a limited amount of innovations (Van Dam 2003). Two examples of innovations developed since the innovation platform has existed are standardized process for soil sanitation and archeology integrated in project development assignments. Standardized soil sanitation

6 According to the following industrial experts: Messrs Van Rees, Burgers, and Zegwaard.

is a process innovation which cause lower costs through the use of standardization in the execution. Oranjewoud BV is also the first company in the advice- & engineering sector that integrates archeological research in project development assignments, especially in those cases in which it involves grounds that need to be made ready for building and is fallow. However, to compete, innovation is not enough but you also have to protect yourself against imitation. Therefore, this Master Thesis studies the possibilities to effectively protect ETI-innovations against imitation.

Oranjewoud BV is one of the main players within the advice- & engineering sector, with sales of approximately 200 million euros and several departments in the whole of the Netherlands (Annual Report Oranjewoud 2003). They provide high-quality services for a broad range of infrastructure, city development, building, scenery and landscape, environment, safety and maintenance, real estate business, and sport and leisure activities (Annual Report Oranjewoud 2003). Oranjewoud BV provides services during the complete project, from research to the realization and management of projects (Annual Report Oranjewoud 2003). In other words, Oranjewoud BV adopts a one-stop- shopping strategy. Governments, firms and non-profit organizations are customers of Oranjewoud BV. It should be noted that the government is the most dominant customer (Annual Report Oranjewoud 2003).

Although a research in one company limits the possibilities to generate general conclusions and recommendations, constrains with respect to costs and entry possibilities within companies did not make it possible to investigate more companies within the advice- & engineering sector. Chapter 5 discusses this limitation in more detail and provides several reasons why it is still possible to generalize the findings of this research.

1.5 Overview of the paper

This Master thesis is structured in three main parts. The first part, consisting of Chapter 2, presents a theoretical building block. This theoretical building block supports the qualitative research performed in this study. The second part of the thesis, consisting of Chapters 3 and 4, contains the qualitative research. Chapter 3 presents the research approach and the data gathering methods. In Chapter 4, the results are presented.

Therein the actual research findings are discussed. Chapter 5 contains the main

conclusions and recommendations of this Master thesis.

2. Value Protection

This chapter provides a framework in which value protection is discussed. For that a review will be given of important literature with regard to value appropriability and value protection. The purpose of this chapter is to provide insight into value protection. First, this chapter examines value appropriability and value protection in general (§ 2.1).

Definitions will be given of value appropriability and value protection. Second, imitation is discussed (§ 2.2) followed by a paragraph about the means of value protection (§ 2.3).

This paragraph is divided into a part about means of protection in general and a part about value protection for technical products and services. The third paragraph investigates ETI-innovations (§ 2.4). The first part of this paragraph deals with easy-to- imitate innovations in general and the second part deals with the means of value protection for easy-to-imitate innovations. The last paragraph (§ 2.5) consists of a summary and the main conclusions.

2.1 Definitions

What do we mean exactly by the term ‘appropriability’? The term appropriability refers, in general, to the profit that the innovator can capture from an innovation (e.g. Levin et al. 1987; Teece 1986).

Harabi (1995) distinguishes two sorts of appropriability: appropriability ex-ante and appropriability ex-post. The first concerns “the returns that an innovator can expect to appropriate privately”; the last concerns “the proportion of social returns that can be privately appropriated by the innovator after the innovation has been introduced. Ex- post appropriability determines whether economic units invest in an innovation or not, as ex-post appropriability determines ultimately the profits for the innovator. Therefore, appropriability is an important incentive to innovate (Harabi 1995; Levin et al. 1987;

Arrow 1962; Schumpeter 1950). Since innovation is an important driver of economic growth,

appropriability indirectly is a driver of economic growth.

A principal objective of a firm is to be profitable, so it will only invest in innovations when the appropriability ex-post is worth it (e.g. Harabi 1995; Levin et al 1987; Mansfield et al. 1981). However, “innovations of major commercial significance will be a desirable object of imitation” (Gemser 1999). According to Gemser (1999), if an innovation can be

7 www.innovatieplatform.nl

imitated, appropriability and thus profitability may be substantially reduced. Value protection has to impede imitation by rivals.

I define ETI-innovations as innovations of which formal means of appropriation

are not very effective contrary to NETI-innovations of which formal means of appropriation are more effective.

An appropriability regime refers to “the environmental factors, excluding firm and market structure, that govern an innovator’s ability to capture the profits generated by an innovation. The most important dimensions of such a regime are the nature of technology, and the efficacy of legal mechanisms of protection” (Teece 1986). The nature of technology consists of, whether something is a process or is a product and whether knowledge is codified or tacit. Process innovations are more difficult to imitate due to the possibility to keep the innovation for yourself (secrecy). Innovations based on tacit knowledge are more difficult to imitate than innovations based on codified knowledge, since codified knowledge is “easier to transmit and receive, and is more exposed to industrial espionage and the like. Tacit knowledge by definition is difficult to articulate and so transfer is hard unless those who possess the know how in question can demonstrate it to others” (Teece 1986).

2.2 Imitation

Schumpeter links innovation and imitation in most of its important work (Gemser 1999).

According to Schumpeter (1939), competitors will imitate successful innovations.

Therefore, Schumpeter states that in the long run an innovation can never create a competitive advantage. However, imitation is not priceless, there are some costs for imitators.

Mansfield et al. (1981) measured these imitation costs for competitors. They obtained data from chemical, drug, electronics and machinery industries concerning the cost and time of imitating 48 product innovations. On average, the ratio of the imitation cost to the innovation cost was 65 % and the ratio of the imitation time to the innovation time was 70 %. Imitation costs do generally increase with the use of patent protection.

Imitation of successful ETI-innovations acquires probably less time and costs than for NETI-innovations because less effort is needed to imitate ETI-innovations.

8 Formal means of protection are those means of protection that make use of rules such as copyrights and patents that are developed and enforced by governmental authorities.

In addition, the authors conclude that patent protection reduces imitation in ethical drugs more than the other industries. The reason is that “it frequently would have been relatively cheap (and quick) for an imitator to determine the composition of a new drug and to begin producing it. However, for many of the electronics and machinery innovations, it would have been quite difficult for imitators to determine from the new product how it is produced, and patents would not add a great deal to imitation cost (or time)” (Mansfield et. al. 1981).

In the view of Mansfield et al. (1981), there is a considerable need for more studies of the size, determinants and effects of imitation costs, just as Levin et al. (1987) call for more studies in the area of appropriability. This Master thesis provides such a study by investigating means of protection for ETI-innovations, which will raise imitation costs.

2.3 Means of Protection

Different empirical studies examined the effectiveness of several means of appropriability, resulting in gaining profits from an innovation and countering imitation.

Most of them investigate appropriability in a technological oriented setting (e.g. Levin et al. 1987; Cohen et a. 2000; Granstrand 1999; Harabi 1995; Zander 1991).

Others investigate appropriability in a non-technical sector. Lopez & Roberts (2002) investigate appropriability for innovations within the financial services sector, a sector with many, so-called, ETI-innovations. Gemser (1999) also investigates appropriability in an easy-to-imitate setting, the Italian and Dutch design furniture industry. The results of the investigations of Gemser and Lopez & Roberts are discussed in the next paragraph, which deals with the appropriation of ETI-innovations. This paragraph examines the results of the studies performed in the technical oriented settings.

2.3.1 General notes

Teece (1986) is one of the first authors who introduced a conceptual framework to

examine the appropriability of an innovation. He provides three fundamental building

blocks to counter imitation and gaining the profits from an innovation: the appropriability

regime, the dominant design paradigm, and complementary assets. The appropriability

regime is concerned with protection and consists of two determinants. On the one hand,

legal instruments such as patents, copyrights and trade secrets and on the other hand

the nature of technology. The nature of technology examines whether something is a

product or a process and whether something consists of tacit and/or codified knowledge.

The nature of technology can be a rather important determinant of the appropriability regime (Mansfield et al. 1981; Teece 1986).

With respect to the response time of imitation, Mansfield (1985) studied the speed of disclosure of various kinds of technological information to competitors. A research of 100 technological American firms unveiled that information concerning development decisions leak out to competitors within an average of 12 to 18 months, and information about nature and operation of a process or a product within a year. According to Mansfield (1985) this is an explanation for why industrial innovations are so often imitated relatively soon after its first introduction. With a strong appropriability regime imitation can be made difficult despite the fact that potential imitators have access to the information of the innovation.

2.3.2 Protection of NETI-innovations

Most studies on appropriability mechanisms investigate protection mechanisms for economic returns on technical innovations. Levin et al. (1987) examined the effectiveness of technical patents and the effectiveness of some alternative means of protection. In the following, this study is indicated as the ‘Yale-study’. The Yale-study examined the appropriability conditions in more than 100 different manufacturing industries based on 650 respondents. The main results of this study are presented in Table 2.

In the Yale-study, two sorts of innovations are distinguished: process innovations and product innovations. This is a common distinction used by several authors (e.g. Nelson 1986; Zander 1991; Cohen et al. 2000; Harabi 1995; Wijnberg 2004). Process innovations aim at internal activities, often not directly perceptible for customers.

Product innovations aim at real products and are often directly perceptible for customers.

The results of the study signal differences between product and process innovations.

Sales or service efforts and lead-time seem the most effective methods of appropriation for technological products. Whereas the most important aspects for technological process innovations are lead-time and moving quickly down the learning curve. The effectiveness of the protection mechanisms seems to differ between process- and product innovations. In addition, often more than one mechanism was judged effectively.

Another important result was that in most industries, even the research & development

intense industries (except pharmaceutical) firms did not mention patents as one of the important means of appropriability.

Table 2: Effectiveness of Alternative Means of Protection (Yale-study)⁹

Overall sample means

Method of appropriation Processes Products

3.52 4.33 Patents to prevent duplication¹⁰

(0.06) (0.07) 3.31 3.75 Patents to secure royalty income¹¹

(0.06) (0.07) 4.31 3.57 Secrecy¹²

(0.07) (0.06) 5.11 5.41 Lead-time¹³

(0.05) (0.05) 5.02 5.09 Moving quickly down the learning curve¹⁴

(0.05) (0.05) 4.55 5.59 Sales or service efforts¹⁵

(0.07) (0.05)

In addition, the Yale-study signals differences between industries in the use of means of appropriability and is consistent with earlier studies (e.g. Mansfield et al. 1981; Cohen et al. 2000). Cohen et al. (2000) investigated the nature and strength of appropriability conditions and focused on the US manufacturing sector just as the Yale-study. A short summary of the results of this study is presented in Table 3.

The sums of the columns, which rise above 100 %, suggest that firms rely upon more than one mechanism to protect an innovation. Firms commonly employ a variety of mechanisms to protect their innovations (see also the Yale-study). Just as in the Yale- study, Cohen et al. (2000) distinguish product and process innovations. Just as in the

9 Range: 1 = not at all effective; 7 = very effective. Between parentheses is the standard error.

10 Patents to prevent duplication protect innovations by deterring competitors to imitate an innovation because the innovation is not allowed to be imitated due to rules which are developed and enforced by governmental authorities.

11 Patents to secure royalty income protect the appropriability of innovations by gaining money by licensing a particular innovation to competitors.

12 Secrecy protects innovations by having the competitors no idea of what for innovations there are or how they work.

13 Lead-time protects innovations by having a competitive advantage over possible imitators, deterring competitors from imitation. In addition lead-time ensues a period whereby there is no competition at all. In such a scene it is easier to become profitable.

14 Moving quickly down the learning curve protects innovations by having a knowledge advantage over the competitors whereon an innovation is based. Therefore, competitors are less able to imitate quickly.

15 Sales or service efforts protect innovations by building up a strong market position that deters competitors to imitate because they are afraid to compete since the innovator has a strong market position.

Yale-study the effectiveness of the methods of protection differed from process and product innovations. The results of Cohen et al. (2000) also agreed with the ‘Yale-study’

that differences exist between industries in the use of means of appropriability and their effectiveness.

Table 3: Mean percentage of innovations for which mechanism considered effective (Cohen et al. 2000)¹⁷

Overall sample means

Method of Appropriation Processes Products

50.59 51.00 Secrecy

(1.03) (0.96) 23.30 34.83 Patents

(0.83) (0.94) 15.39 20.71 Other legal¹⁸

(0.63) (0.73) 38.43 52.76 Lead-time

(0.96) (0.92) 30.73 42.74 Sales or service efforts

(0.88) (0.91) 43.00 45.61 Manufacturing advantages¹⁹

(0.95) (0.88)

Further, the results suggest that in no industry, not even pharmaceuticals (contrary to the Yale-study), patents are identified as the most effective appropriability mechanism.

Nevertheless, patent protection was one of to the most important means in some industries such as medical equipment, drugs, special purpose machinery and auto parts.

Secrecy and lead-time are ranked overall as the most effective appropriability mechanisms for product innovations. For process innovations, secrecy is the most effective mean of appropriability, although in some industries it is closely followed by complementary manufacturing capabilities. With that, the results of Cohen et al. (2000) differ from the results of the Yale-study. Cohen et al. (2000) do not explain this. Maybe, the difference between the results of the Yale-study and the study Cohen et al. (2000) lies in the different time-period the research was executed. Despite the fact, there does

16 Table 1 and 2 of the study of Cohen et al. (2000).

17 Responses for which the protection mechanism considered effective. Categories were: less than 10%, 10-40%, 41-60%, 61-90%, and greater than 90%. Means were computed using category midpoints. The standard error is given between parentheses.

18 Other legal means such as copyrights protect innovations through formal rules enacted by therefore appropriate authorities.

19 Manufacturing advantages protect innovations for imitation by building up competitive advantages in the production process, e.g. higher quality for the same cost price or a lower cost price at the same quality.

not seem to be an explicit reason why both studies differ, the difference should not be overestimate. The most important difference is the order of means of protection and not the fact whether a particular mean of protection is effective or not.

The Yale-study and the study of Cohen et al. (2000) were both executed in technical oriented sectors in the U.S. Granstrand (1999) executed a study to examine the means for commercializing

new product technologies in Japan and Sweden. He investigated chemical, electrical and mechanical industries in both countries. The results of that study are presented in Table 4.

Table 4: Means of Appropriation in Japan and Sweden (Granstrand 1999)²¹

There are some remarkable results. Patent protection ranked highest in Japan, contrary to Sweden and the US. Creating switching cost is ranked lowest in Japan and Sweden.

Overall, means of appropriation are ranked higher for Japan than for Sweden and the US.

Therefore, protection is overall perceived higher in Japan than the Western economies.

Especially the importance of formal protection mechanisms differs. A possible explanation could be that Japanese culture is, I think, more oriented towards rules than the more liberated Western economies.

The differences between Japan, Sweden and the US regarding the perceived effectiveness of informal methods of appropriation do not seem exceptionally high.

20 Granstrand (1999) uses the word commercializing but he studies means of appropriability as I discussed. With the term ‘commercializing’, Granstrand emphasizes that means of appropriability play a role at the moment of commercializing.

21 Scale: No importance = 0,1,2,3,4 = Major importance.

22 As reported in the Yale-study. Perceptions of the mid-1980s, rescaled to the scale used in the current study.

23 Superior marketing protects innovations by building up a strong market position that deters competitors to imitate because they are afraid to compete since the innovator has a strong market position (are equal to sales or service efforts as used in the Yale-study).

24 Switching costs at user end are costs for a customer to switch to another supplier. For a competitor it will be in this case less attractive to imitate an innovation because it is more difficult for him to gain market share.

Overall sample means Method of Appropriation

Japan Sweden US²²

Patents 3.4 1.9 2.0

Secrecy 2.4 2.0 1.7

Lead-time 2.9 2.4 2.9

Superior marketing²³ 2.9 3.0 3.1

Manufacturing advantages 3.1 2.7 2.7

Switching costs at user end²⁴ 2.3 1.7 n.a.

Although, formal protection is perceived higher in Japan, this does not show at the cost of the perceived effectiveness of informal protection means.

Just as the Yale-study and Cohen et al. (2000), Granstrand (1999) distinguishes product and process innovations. The results for Japan are presented in Table 5.

Table 5: Means for commercializing new product and process technologies in Japan (Granstrand 1999)²⁵

Overall sample means

Method of Appropriation Processes Products

Patents 3.13 3.42

Secrecy 2.67 2.43

Lead-time 2.78 2.87

Superior marketing 3.13

Manufacturing advantages 2.91 Switching costs at user end 2.33

Again, there were differences between product innovations and process innovations (see also the Yale-study; Cohen et al. 2000). In addition, the results indicate again differences between industries (see also the Yale-study; Cohen et al 2000). Patents and lead-time were perceived more effective for the chemical and for the electrical industries than for the mechanical industry. That patents are perceived more effective for chemical industry corresponds with the research of Mansfield et al. (1981). The effectiveness of patents for chemical industries in this study correspondent with most researches. Why patents are perceived to be more effective for electrical industries, contrary to earlier research (e.g. Mansfield 1981), is not clear.

Creating switching costs was perceived more effective for the electrical industry than were both the others. This is probably due to the necessity to acquire a lot of know how to work with a particular product or the need for particular adaptations: e.g. the videos for the video 2000 system were not exchangeable with the videos for the VHS system unless high costs of dubbing the videos to the two different formats.

Granstrand (1999) performed a study for Japan and also partly for Sweden to examine the means of appropriation in these countries for technical oriented innovations. Harabi (1995) performed an empirical study in Switzerland to examine the appropriability of technical innovations. The results of the study of Harabi are presented in Table 6.

25 Scale: No importance = 0,1,2,3,4 = Major importance.

Table 6: Effectiveness of alternative means of protection in Switzerland (Harabi 1995)²⁶

Overall sample means

Method of appropriation Processes Products

2.76 3.44 Patents to prevent duplication

(0.11) (0.14 3.25 3.60 Patents to secure royalty income

(0.14) (0.15 3.89 3.60 Secrecy

(0.14) (0.15 5.37 5.63 Lead-time

(0.16) (0.10) 4.56 4.42 Moving quickly down the learning curve

(0.12) (0.11) 5.20 5.70 Superior sales or service efforts

(0.13) (0.11)

For process innovations, lead-time is considered the most effective means of appropriation. For product innovations, superior sales or service efforts are considered the most effective means of appropriation, followed by lead-time. For both, product and process innovation, patents are generally seen as the least effective means of appropriation. Patents seemed only effective in a few industries in Switzerland:

chemicals and in sectors of the machinery- and electronics industry. As far as the chemical and electronics industry is concerned these results are consistent with earlier studies (e.g. the Yale-study; Cohen et al. 2000). Harabi (1995) signals that in some sectors of the machinery industry patents seemed effective, which is contrary to earlier research. However, the study of Harabi is only one of the few studies which focuses not only on the broad formulated sector e.g. the mechanical sector, but studied the sectors also more in-depth, distinguishing several sub sectors. Probably, certain sub sectors differ from the dominant results with respect to the general perceived effectiveness of patents in the broad formulated mechanical sector.

Harabi (1995) also noticed differences between industries with respect to the effectiveness of the different means of appropriability (see also Granstrand 1999; the Yale-Study; Cohen et al. 2000). Nevertheless, Harabi also states, different from other authors, that there are more and other means of Appropriability, such as economies of scale and certain market structures.

Zander (1991) studies technology dissemination. He distinguishes two aspects of the umbrella of technology dissemination. On the one hand, there is the replication of

26 Scale: Not at all effective = 0,1,2,3,4,5,6,7 = Very effective. The standard error is given between parentheses.

activities in order to grow. On the other hand, he distinguished the constant threat of competitors who, by imitation, replicate the innovator’s activities. Imitation by competitors is undesirable. He studies Swedish Multi National Corporations to identify the determinants of dissemination patterns. He specifically focused on the effects of the nature of technology on the dissemination patterns. Zander (1991) investigates manufacturing technology only.

A number of variables related to the firms’ strategies to protect their technology from being imitated, such as the use of proprietary equipment,

and continuous development of the product and the manufacturing process, are shown to effectively reduce the risk of early imitation. The loss of key employees on the other hand seems fatal for keeping a technology from being imitated. Zander’s results are consistent with earlier studies, nevertheless he sometimes makes use of different descriptions. The use of proprietary equipment can be seen as secrecy. The reason is that the key issue of proprietary equipment, is the in-house development and exclusive usage within the firm, resulting in equipment no one from outside the company has any knowledge about. The loss of key employees is a new protection mechanism brought up for NETI-innovations but I will discuss this in more detail in section 2.4.

2.4 ETI-innovations

This paragraph examines the appropriability of ETI-innovations. For that, first ETI- innovations are characterized and explained (§ 2.4.1). After that, the protection of ETI- innovations is examined (§ 2.4.2).

2.4.1 General Notes

Levitt (1966) states: “it is relatively easy-to-imitate rapidly in some industries because the capital requirement is small, and the products are relatively easily and quickly copied”. A small capital requirement does not put up a financial threshold so companies can easily imitate without reserving a lot of money for the imitation. Products are easily and quickly copied when a product is not very complex or lack ‘tacit knowledge’

(Reed

& DeFillipi 1990). According to Reed & DeFillipi (1990), tacitness in skills, complexity in skills and specificity of resources breed causal ambiguity in competitive advantage, so raising barriers to imitation. Kogut & Zander (1992) state that knowledge can be tacit

27 I.e. machinery of software developed and exclusively used within the firm.

28 Tacit knowledge (or tacitness) refers to “the implicit and noncodifable accumulation of skills that results from learning by doing” (Reed & DeFillipi 1990).

“which has broad implications for understanding the difficulty of imitating skills, a problem lying at the heart of artificial intelligence to the competitive analysis of firms”.

Tacit knowledge is much more difficult to copy than explicit knowledge. Nevertheless turnover of employees implies that tacit knowledge of a firm reaches another firm (Zander 1991, Kogut & Zander 1992). The reason for that is that tacit knowledge is noncodifable knowledge which is possessed by a specific employee.

Lopez & Roberts (2002) mention the financial service industry, and in particular the consumer-oriented products of the financial service industry, as a sector in which the appropriability regime is weak. According to them “little protection is allowed either in the form of copyright or trade secret laws. Very few patents have been awarded to financial products”. Lopez & Roberts (2002) work with the definition that the appropriability regime only consists of formal means of protection.

According to Macmillan et al. (1985) most services can be typified by low protection from (rapid) imitation by competitors. According to Macmillan et al. (1985), service innovations become easy-to imitate when development costs are low, response time

short and the innovation generated a large volume of business and the innovation had to be successful. An innovation which does not generate a large volume of business and is not successful will not, in general, be imitated.

2.4.2 Protection of ETI-innovations

Lopez & Roberts (2002) state that in weak appropriability regimes new services can be quickly copied and improved. Since some formal means of appropriation are not working effectively in specific sectors as the financial service sector, firms probably use a combination of means of appropriation or emphasize alternative methods (Lopez &

Roberts 2002). Alternative means mentioned by Lopez & Roberts (2002) are early entry and the ‘response lag’.

Macmillan et al. (1985) take the point of view that in absence of protection from imitation, the response lag is critical. During the response lag, an innovator has a secured monopoly position according Macmillan et al.

Lopez & Roberts (2002) studied the effects of market lead-time on market share advantage in the international financial services industry because “numerous empirical

29 Response time is “the time it takes for competition to respond aggressively to a new product”

(Macmillan 1985).

30 The ‘response lag’ extends “from the time of launch of the product until competition from comparable products drives margins down and the product assumes commodity status” (Macmillan et al. 1985).

findings report market share advantages to early entrants, however other studies no not report advantages from pioneering new products.” The results from the study suggest significant market share advantages for early entrants, which enhance the appropriability of innovations according to Lopez & Roberts.

Gemser (1999) also performed a study on the appropriability of ETI-innovations. She studied the appropriability of new product design in the Italian and Dutch furniture industry. The furniture industry is a sector which lacks a strong formal appropriability regime and in which product design is easy-to-imitate (Gemser & Wijnberg 2001).

Contrary to Lopez & Roberts (2002), Gemser (1999) studied more than one appropriability mechanism. Table 7 contains the results.

The effectiveness of formal means of appropriation is perceived more different between furniture firms from Italy and furniture designers from the Netherlands contrary to the informal means of appropriation. Nevertheless, there is also one informal mean of appropriation which is perceived significantly different between the Netherlands and Italy; avoiding reputational repercussions.

Formal means are perceived less effective, in both countries, in appropriating benefits from design innovations in the furniture industry than informal means. Although the Dutch furniture designers perceive the effectiveness of formal means of appropriability higher than the Italian furniture designers, the Dutch furniture designers rely, just like the Italian designers, more on the informal means of appropriability.

Secrecy is contrary to earlier studies, not that effective in appropriating benefits, probably because the study investigates only product innovations. Overall, the informal means do not show very significant different, between Italy and the Netherlands, in their effectiveness, although avoiding reputational repercussions is a little more effective in Italy than in the Netherlands. This is probably due to a more status based culture in Italy.

Furthermore, the study of Gemser provides us with some other appropriability means

caused by the fact that she investigated ETI-innovations as earlier studies investigated

NETI-innovations.

Table 7: Effectiveness of means in appropriating benefits from design innovations (Gemser 1999)³¹

Sample mean per country of origin Means of Appropriation Overall Sample

mean

Italy Netherlands

Formal

Utility models / small patents 2.12 2.28 2.00 Ornamental models 2.56 2.10 2.93

Copyrights 2.43 1.55 3.25

Informal

Secrecy 2.13 2.20 2.07

Creating high capital requirements³² 3.88 3.90 3.86 Engaging in continuous development 3.92 3.93 3.91 Avoiding loss of key employees³³ 2.48 2.46 2.50 Prohibiting suppliers to deliver to rivals³⁴ 2.40 2.46 2.36 Avoiding reputational repercussions³⁵ 4.44 4.64 4.29

2.5 Summary & Conclusions

Appropriability refers to the capturing and protecting of value and is relevant since appropriability is an important driver of innovation. Value protection is considered to be necessary to prevent innovators from imitation by competitors, since imitation can harm the profitability of the innovator. Without the possibility to protect the value underlying an innovation, a firm is tending less towards innovation.

Competitors will imitate successful commercial innovations of innovators, which lowers the profitability of innovators. In general, imitation costs are below innovation costs.

Nonetheless, there are means to protect innovation from imitation by raising the imitation costs of the competitor.

31 Range: 1 = not at all effective; 5 = very effective

32 Creating high capital requirements protects an innovation against imitation because there are sufficient financial resources needed to imitate a product. The huge investment makes it for some competitors impossible to imitate and deterring others who decide to invest their scare financial resources into something else.

33 Avoiding loss of key employees protects innovations against imitation by not allowing the removal of tacit knowledge. Nevertheless, an innovation should therefore be built on the tacit knowledge of the own employees (see also 2.4.1 General Notes).

34 Prohibiting suppliers to deliver to rivals protects innovations against imitation by prohibiting suppliers to transfer knowledge which they posses through contracts with competing firms.

35 Avoiding reputational repercussions protects innovations against imitation because imitation could harm a reputation for innovativeness. In a sector where a reputation for innovativeness is considered as strategic value, this is fatal. Therefore, companies do not want to imitate in those sectors.

There is a distinction between formal and informal means of protecting innovations against imitation and often authors choose for a delimitation between product and process innovations.

A number of studies have focused on the protection of technical innovations; most of them are NETI-innovations. The most essential conclusions concerning the NETI- innovations and means of value protecting are:

-

all authors agree that firms rely upon more than one mechanism to protect their innovations;

-

informal means of protection are often more important than formal means of protection (pharmaceuticals is sometimes an exception);

-

all authors agree that there are differences in protection means and their effectiveness between process innovations and product innovations;

-

lead-time and sales/service efforts are mentioned mostly as the most effective protection mechanisms;

-

no most effective protection mechanism can be mentioned in general for process innovations;

-

all authors agree that there are differences between industries in the use of means of protection and their effectiveness;

-

in general, formal protection is perceived higher in Japan than in Western oriented economies;

-

there seems to be a difference among Western oriented economies in the effectiveness of certain protection means.

In sum, there are numerous means of protecting the competitive advantages of technical innovations.

In addition to the studies to the protection means of NETI-innovations, protection means concerning ETI-innovations have acquired more attention recently e.g. Gemser (1999) and Lopez & Roberts (2002). The most important conclusions resulting from those studies in respect with this paper are:

-

market lead-time builds up market share advantages (Lopez & Roberts);

-

informal means are perceived more effective than formal means of protection (Gemser);

-

avoiding reputational repercurssions, engaging in continuous development,

and creating high capital requirements are perceived as the most effective

means of appropriation (Gemser);

-

there is a major difference between Italy and the Netherlands as far as the perceived effectiveness between formal means of protection, especially copyright, which is perceived much more effective in the Netherlands than in Italy (Gemser), this signals differences between countries as far as the perceived effectiveness of formal protection mechanisms is concerned;

-

there is no large difference between Italy and the Netherlands as far as the perceived effectiveness between informal means of protection is concerned (Gemser) this signals a lack of differences between countries as far as the perceived effectiveness of informal protection mechanisms is concerned.

In contrast to the researches executed for NETI-innovations, Gemser (1999) and Lopez &

Roberts (2002) do not make a distinction between product and process innovations.

So far, we noticed differences between the means of appropriability and their perceived

effectiveness between NETI-innovations and ETI-innovations. Therefore, research in the

area of ETI-innovations, in which there seem to be very few researches concerning the

means of protecting the value of an innovation, is justified. In addition, there seem to be

differences between industries and means of protection and their perceived effectiveness

for ETI-innovations, as well for NETI-innovations. Therefore, the results ensuing from

the studies of Gemser (1999) and Lopez & Roberts (2002) are not applicable without

major restrictions and question marks in de the advice- & engineering sector. A

delimitation of the study in to the Netherlands implies that the results are only applicable

to the Netherlands. Budget and time limited the research area and the possibilities for

more global oriented conclusions is, regrettably enough, limited.

3. Research Framework

This Chapter describes the research framework used in this master thesis. First, the method of research is discussed (§ 3.1), followed by a description of the sample (§ 3.2), and the method of analysis (§ 3.3).

3.1 Method of Research

This study aims to get insight in the mechanisms that assure the appropriability of ETI- innovations. Earlier research in this area suggests different mechanisms to protect ETI- innovations from imitation (see § 2.4.2 and § 2.4.3). Contrary to most studies performed earlier on appropriability mechanisms; in this empirical research, I will not ask respondents to rate the effectiveness of specific, pre-determined appropriability mechanisms; instead I want to achieve that the respondents come up with appropriability mechanisms themselves. From the empirical results of studies performed earlier it can be concluded that means of appropriability and their perceived effectiveness differs among industries. By defining means of appropriation at forehand, there is, first a risk to overlook a particular mean which is typical for the advice- & engineering sector, and second the respondents could have been influenced (Malhotra 1999;160).

My research is explorative in nature; therefore, I do an explorative research to study the appropriability mechanisms of ETI-innovations. Explorative research (‘t Hart et al.

1998;72, Malhotra 1999;84) is most suited for this study because explorative research tries to provide insights and understanding. This corresponds with the goal of the current research. Besides explorative research there is also testing research (’t Hart et al. 1998;72). Testing research focuses on the cases in which investigators already posses possible solutions (‘t Hart et al. 1998;72). I do not posses possible solutions at forehand in this Master thesis, therefore this research is not a testing research but rather an explorative research. Explorative research is flexible, unstructured and makes use of qualitative data.

According to Malhotra (1999;85) there are four research methods / characteristics to go with the framework of explorative research: pilot surveys; secondary data; qualitative research and industrial experts. I make explicitly use of two of them: qualitative research

and company informants who know a lot of the industry. To have the

36 Qualitative research is research which focuses on the description of properties in contrary with quantitative research which focuses on the measurement of properties (’t Hart et al. 1998;103).

possibility to generalize the results of this study, I also included some persons who do not work at Oranjewoud BV anymore or who worked somewhere else between this study and five years ago. Some of them worked for competitors, some of them work for competitors, one of them works at the customer side and one of them has a lot of experience in different sectors (see also appendix B). Most of the persons who work or worked somewhere else work or worked for main competitors. One person works for a client now. Since clients also imitate innovations from Oranjewoud BV and are in that sense competitors, this respondent can provide a valuable contribution. Another person worked for many years in the advice sector in which there are many ETI-innovations and therefore exactly knows what she is talking about.

The qualitative research takes place by having in-depth interviews. These interviews have provide me with insights in the appropriability mechanisms and their effectiveness in the advice- & engineering sector by asking respondents to report typical experiences and / or central tendencies within the industry.

3.2 Sample

The selection of industrial-experts is not at-random. I selected those respondents, who can make a valuable contribution, because they are concerned with innovation in the advice- & engineering sector for many years and thus posses a lot of experience in this field. A short description of the respondents can be found in appendix B. The respondents had different backgrounds and functions and have all worked for Oranjewoud BV, although some of them do not work there anymore, see also Appendix B.

Ultimately, I have executed 10 interviews. The respondents of the last three of these 10 interviewees did not provide new information; therefore, I decided to stop interviewing after questioning 10 respondents.

All authors agreed with the definition of ‘new’ provided during the interview and with the division in process and product innovations, both discussed earlier in the introduction.

Therefore all respondents used the same framework in which they responded to the

interviewer’s questions.

3.3 Method of Analysis

For the in-depth interviews, I made a short and open interview guideline, which is inserted in appendix A. The results of the first interviews were discussed with the respondents who were questioned last. This happened at the end of the interview;

otherwise it could influence the interviewee’s own opinion. This method should not be confused with the Delphi method (Leeflang 1994:413). In the Delphi method the results are discussed with the same people interviewed earlier, I discussed the results of earlier interviewees with other interviewees. The next Chapter contains the results of the research described here. These results are based on inductive reasoning (‘t Hart et al.

1998:284), which means, in short, that based on separate perceptions a more general judgment is formulated. This means that I tried to formulate conclusions based on what the individual respondent said. I tried this, not only for ETI-innovations in the advice- &

engineering sector, but also for ETI-innovations in general.

The effectiveness of several protection mechanisms is measured by means of rank-order

scaling. In rank-order scaling respondents are presented with several objects

simultaneously and asked to order or rank them according to some criterion (Malhotra

1999;256). The objects in this case were the existing protection mechanisms in the

advice- & engineering sector according to the respondent and the criterion for ranking is

the effectiveness of a particular protection mechanism. This approach is comparative in

nature, and the respondent may find a protection mechanism ranked 1, ineffective in

absolute sense. Two important advantages of this ranking system is that the respondent

is forced to discriminate among the stimulus object and that most respondents

understand the instructions for ranking easily.

4. Research Results

This Chapter contains the results of the interviews with 10 respondents about effective means of protection for innovations in the advice- & engineering sector. First the results concerning imitation (§ 4.1) and those concerning protection mechanisms for advice- &

engineering services are presented (§ 4.2), followed by the perceived effectiveness of the protection mechanisms in the advice- & engineering sector (§ 4.3). The last paragraph consist of a summary and the main conclusions (§ 4.4).

4.1 Results concerning imitation

4.1.1 Degree of imitation

All respondents agreed that imitation is an often-occurring

event within the advice- &

engineering sector. All respondents agreed that there are two sort of services within the advice- & engineering sector: the advice services and the engineering services. A large majority of them mentioned themselves that innovations in both types of services are different. The respondents who did not mention this difference themselves, agreed on the point of view of the interviewee, that there are differences between the type of innovations in the advice services and the type of innovation in the engineering services.

The engineering services are more technically oriented and consist of complex techniques contrary to most advice services. According to the respondents, imitation occurs mostly within the advice services category in which it is easier to imitate. The second category is less liable to imitation since these services require more tacit and complex knowledge.

In addition, these services are, contrary to the advice services, suited for patent protection. The respondents stated that within this sort of services, employee turnover is also substantially lower. The rest of this Chapter is about the ETI-innovations unless mentioned otherwise.

According to a respondent the common tendency in the sector is: “better properly stolen than badly invented.” All respondents shared this opinion. Most respondents stated that, besides competitors, even customers do imitate the advice- & engineering firm they hired. Customers make use of specific models or methods they acquired through public tenders. They even imitated firms that did not get the project. According to the respondents, firms (in any case Oranjewoud) do not attempt steps to stop this because;

37 The respondents do not specify how often, however, the common idea is that every successful innovation is imitated.