Section3

Question 1

What is Profiting from Innovation (PFI) about?

Answer 1

• It’s about who profits from new inventions.
• Outlined by Teece (1986), focusing on:
  
  • Appropriability regimes
  • Dominant designs
  • Complementary assets

Question 2

Define Appropriability Regime

Answer 2

• The extent to which an innovator can capture profits.
• Strong regime: hard to imitate (e.g., patents).
• Weak regime: easy to imitate (e.g., few legal protections).

Question 3

Why is Appropriability crucial?

What are the players?

Answer 3

• Determines who reaps most rewards: innovator, suppliers, or imitators.
• Impacts profit distribution among market players.

Question 4

What is a Dominant Design?

Answer 4

• The standard product or process format that emerges in an industry.
• Before it, competing designs (pre-paradigmatic); after it, industry converges.

Question 5

What are Complementary Assets?

and name the types

Answer 5

• Additional resources needed to commercialise an innovation effectively.
• Examples:
  
  • Generic (e.g., cloud hosting)
  • Specialised (custom APIs)
  • Co-specialised (unique data sets).

Question 6

What if an innovator lacks Complementary Assets?

Answer 6

• May partner or contract with others (e.g., OpenAI + Microsoft).
• Risk of sharing profit or losing control.

Question 7

Is GPT₃ easy to replicate?

Answer 7

• GPT₂ was partially replicated from published details.
• GPT₃ is harder to reverse-engineer due to secret training data.
• Shows a relatively strong appropriability (via secrecy).

Question 8

Has a dominant design emerged for large language models?

Answer 8

• Transformer architecture is now the core standard (e.g. GPT, BERT).
• Conversational interfaces (e.g. ChatGPT, Bing Copilot) are becoming mainstream.

Question 9

Why does OpenAI share profit with Microsoft?

Answer 9

• Lacks capital for its own data centres.
• Exclusive partnership secures computing power.
• Microsoft licenses OpenAI tech and co-develops infrastructure.

Question 10

According to Teece (1986), who profits from innovation?

Answer 10

It depends on:

• Appropriability regime (strong vs weak)
• Dominant design (pre vs post)
• Complementary assets (generic vs specific).

Question 11

Can weakening an appropriability regime ever be beneficial?

Answer 11

• Yes. Firms may deliberately open technology to prevent competitors’ patents.
• Example: Merck making gene data public to avoid gene patent blockages.

Question 12

Is Llama 2 fully open-source?

Answer 12

• Meta calls it open-source, but with restrictions (e.g., cannot improve rivals’ LLMs).
• Access often requires approval, so it’s not entirely public domain.