Discussion: View Thread

Following up on Lowell's point, at our highly successful WPI Venture Forum (www.wpiventureforum.org or www.wpi.edu/+CEI), entrepreneurs frequently counsel the audience that one should share an idea widely to test it on others.  If the idea is easily co-opted by someone who heard it, it probably is not a great idea after all.  Greg Erman, a very successful serial entrepreneur, speaks of how he screened 50 ideas down to 12-15, then down to 7, and those he shared with as many people as would listen to him so he could refine and validate the ideas.  There were no NDAs used.

Regards,

Mac Banks

McRae C. Banks, Ph.D.
Department Head,
Professor of Entrepreneurship & Strategy,
Department of Management (the Business School)
215 Washburn Shops
Worcester Polytechnic Institute
100 Institute Road
Worcester MA 01609
Office: 1-508-831-5218
Fax: 1-508-831-5720
Email: macb@wpi.edu

-----Original Message-----
From: Entrepreneurship Division Listserv [mailto:ENTREP@AOMLISTS.PACE.EDU] On Behalf Of Busenitz, Lowell W.
Sent: Wednesday, October 14, 2009 11:23 AM
To: ENTREP@AOMLISTS.PACE.EDU
Subject: [ENTREP] Confidentiality and NDAs for Students, Judges & Speakers

While the issue of confidentiality and the use of NDA's is on the table, I would like to encourage the discussion in another direction.  Based on resource-base theory, those ventures that utilize resources that are valuable, rare, difficult to imitate and non-substitutable have the foundation for building a competitive advantage.   The more sticky a resource or bundle of resources is, the harder it will be for other individuals/firms to replicate them.

From a startup venture standpoint, what does it say about a business concept when the potential founders are so concerned that their "highly confidential" idea for a business concept might be copied and readily implemented by someone else?   My suspicion is that in at least most student situations, if the idea is that fluid with its non-sticky resources, it will not be worth starting up.  At best, it might be a quick flash of opportunity and then disappear. There will be no likely resources connected to the concept or the implementation of it that can lead this venture towards a competitive advantage.  If true, it seems that this may also has implications for the impracticality in using NDAs in our classrooms.

Thoughts?

Lowell Busenitz
Professor, Div. of Management & Entrepreneurship
Puterbaugh Chair in American Enterprise
Price College of Business
307 W. Brooks St.
University of Oklahoma
Norman, OK 73019-4006

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Ventures HO!

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Ventures HO!

Following up on Lowell's point, at our highly successful WPI Venture Forum (www.wpiventureforum.org or www.wpi.edu/+CEI), entrepreneurs frequently counsel the audience that one should share an idea widely to test it on others.  If the idea is easily co-opted by someone who heard it, it probably is not a great idea after all.  Greg Erman, a very successful serial entrepreneur, speaks of how he screened 50 ideas down to 12-15, then down to 7, and those he shared with as many people as would listen to him so he could refine and validate the ideas.  There were no NDAs used.

Regards,

Mac Banks

McRae C. Banks, Ph.D.
Department Head,
Professor of Entrepreneurship & Strategy,
Department of Management (the Business School)
215 Washburn Shops
Worcester Polytechnic Institute
100 Institute Road
Worcester MA 01609
Office: 1-508-831-5218
Fax: 1-508-831-5720
Email: macb@wpi.edu

-----Original Message-----
From: Entrepreneurship Division Listserv [mailto:ENTREP@AOMLISTS.PACE.EDU] On Behalf Of Busenitz, Lowell W.
Sent: Wednesday, October 14, 2009 11:23 AM
To: ENTREP@AOMLISTS.PACE.EDU
Subject: [ENTREP] Confidentiality and NDAs for Students, Judges & Speakers

While the issue of confidentiality and the use of NDA's is on the table, I would like to encourage the discussion in another direction.  Based on resource-base theory, those ventures that utilize resources that are valuable, rare, difficult to imitate and non-substitutable have the foundation for building a competitive advantage.   The more sticky a resource or bundle of resources is, the harder it will be for other individuals/firms to replicate them.

From a startup venture standpoint, what does it say about a business concept when the potential founders are so concerned that their "highly confidential" idea for a business concept might be copied and readily implemented by someone else?   My suspicion is that in at least most student situations, if the idea is that fluid with its non-sticky resources, it will not be worth starting up.  At best, it might be a quick flash of opportunity and then disappear. There will be no likely resources connected to the concept or the implementation of it that can lead this venture towards a competitive advantage.  If true, it seems that this may also has implications for the impracticality in using NDAs in our classrooms.

Thoughts?

Lowell Busenitz
Professor, Div. of Management & Entrepreneurship
Puterbaugh Chair in American Enterprise
Price College of Business
307 W. Brooks St.
University of Oklahoma
Norman, OK 73019-4006

**************************************
This message is from ENTREP which is sponsored by the Entrepreneurship Division of the Academy of Management.

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http://aomlists.pace.edu/scripts/wa.exe?SUBED1=entrep&A=1

If you have questions or need help, please contact Dr. John Bunch  jbunch@benedictine.edu.

Ventures HO!

**************************************
This message is from ENTREP which is sponsored by the Entrepreneurship Division of the Academy of Management.

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If you have questions or need help, please contact Dr. John Bunch  jbunch@benedictine.edu.

Ventures HO!

As a former technology industry R&D executive, I think the discussion is missing some critical points in the understanding of intellectual property rights and value.

1.       There are many more ways to protect intellectual property than patents or NDAs.  Disclosure to a patent attorney or defensive publications are just two.

2.       All intellectual property rights and NDA's requirement enforcement actions.  These do not vary a lot if a patent is filed and obtained.  The patent simply creates a presumption that can be negated with "prior art".  The cost of patent or IP enforcement starts at about $500,000 without any complications (challenges to patent issue, etc.) and takes two to three years.  (An argument for transaction cost economics to be applied to the analysis)

3.       The vast majority of patents have little to no economic value (estimates are less than 1%) and about 85% of patents filed are simple "mechanical" patents, most of which are design improvements to existing products.

4.       I have seen far more "good ideas" not get to market because the "inventors" overestimated the value of their invention and were paranoid about disclosure.  Inventors generally fail to understand the complexities of manufacturing, distribution and marketing.

5.       Most inventors have done little work to "productize" their invention.  They got it to work once, and now need engineering help to get it to work consistently.  This does not even begin to address the manufacturability and related cost/volume issues.

These observations tend to support the Teece (1986) finding.

Lee Caldwell

Dean, Professor of Strategic Management

Gulf University for Science and Technology

PO BOX 7207

Hawally 32093 Kuwait

+965 2530 7333

Caldwell.L@gust.edu.kw

Thanks for this interesting thread. I wanted to address Lowell's and Mac's comments in particular from both a theoretical lens and my professional experiences in technology licensing.

I share Lowell's perspective and think it is useful to consider Teece (1986) where he argues that historically entrepreneurial rents have accrued to the owners of the complementary assets rather than to the innovators.  This is not a pleasant result for those who believe in the "idea" as both a highly valuable and stable construct, but from an appropriability perspective, tracking the idea might be tracking the wrong thing. I argue in a recent paper that the key appropriability problem entrepreneurs face is selecting novel asset combinations under uncertainty when, to paraphrase Mac, most ideas are bad. For those that are interested, I apply this view to re-examine information sharing and resources in the famous Kearn's windshield wiper case and also consider some primary data from repeat entrepreneurs.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1346082

--
Anthony R. Briggs
Phone: (780) 932-5397
************************************** This message is from ENTREP which is sponsored by the Entrepreneurship Division of the Academy of Management. Please do not post messages with attached files. Commercial messages or spammed messages are not allowed on the list. The use of auto-responder "out-of-office" messages may also lead to your removal from the list. You can manage your subscription options, including joining or leaving the list here: http://aomlists.pace.edu/scripts/wa.exe?SUBED1=entrep&A=1 If you have questions or need help, please contact Dr. John Bunch jbunch@benedictine.edu. Ventures HO!

A very practical phrase can place divulgence responsibility of what is perceived as confidential information upon the inventor. After an appropriate IP safeguard such as a disclosure has been executed, the following pronouncement - "there are no indiscreet questions, only indiscreet answers" – spoken at any gathering of inventors and team with potential judges of merit or grantors of funds will work to mitigate liabilities for all.

Jack Savidge

Founder – Senior Advisor

The von Liebig Center, UCSD

La Jolla, CA

Tel 1-858-454-9192

As a former technology industry R&D executive, I think the discussion is missing some critical points in the understanding of intellectual property rights and value.

1.      There are many more ways to protect intellectual property than patents or NDAs.  Disclosure to a patent attorney or defensive publications are just two.

2.      All intellectual property rights and NDA's requirement enforcement actions.  These do not vary a lot if a patent is filed and obtained.  The patent simply creates a presumption that can be negated with "prior art".  The cost of patent or IP enforcement starts at about $500,000 without any complications (challenges to patent issue, etc.) and takes two to three years.  (An argument for transaction cost economics to be applied to the analysis)

3.      The vast majority of patents have little to no economic value (estimates are less than 1%) and about 85% of patents filed are simple "mechanical" patents, most of which are design improvements to existing products.

4.      I have seen far more "good ideas" not get to market because the "inventors" overestimated the value of their invention and were paranoid about disclosure.  Inventors generally fail to understand the complexities of manufacturing, distribution and marketing.

5.      Most inventors have done little work to "productize" their invention.  They got it to work once, and now need engineering help to get it to work consistently.  This does not even begin to address the manufacturability and related cost/volume issues.

These observations tend to support the Teece (1986) finding.

Lee Caldwell

Dean, Professor of Strategic Management

Gulf University for Science and Technology

PO BOX 7207

Hawally 32093 Kuwait

+965 2530 7333

Caldwell.L@gust.edu.kw

Thanks for this interesting thread. I wanted to address Lowell's and Mac's comments in particular from both a theoretical lens and my professional experiences in technology licensing.

I share Lowell's perspective and think it is useful to consider Teece (1986) where he argues that historically entrepreneurial rents have accrued to the owners of the complementary assets rather than to the innovators.  This is not a pleasant result for those who believe in the "idea" as both a highly valuable and stable construct, but from an appropriability perspective, tracking the idea might be tracking the wrong thing. I argue in a recent paper that the key appropriability problem entrepreneurs face is selecting novel asset combinations under uncertainty when, to paraphrase Mac, most ideas are bad. For those that are interested, I apply this view to re-examine information sharing and resources in the famous Kearn's windshield wiper case and also consider some primary data from repeat entrepreneurs.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1346082

--
Anthony R. Briggs
Phone: (780) 932-5397
************************************** This message is from ENTREP which is sponsored by the Entrepreneurship Division of the Academy of Management. Please do not post messages with attached files. Commercial messages or spammed messages are not allowed on the list. The use of auto-responder "out-of-office" messages may also lead to your removal from the list. You can manage your subscription options, including joining or leaving the list here: http://aomlists.pace.edu/scripts/wa.exe?SUBED1=entrep&A=1 If you have questions or need help, please contact Dr. John Bunch jbunch@benedictine.edu. Ventures HO!

************************************** This message is from ENTREP which is sponsored by the Entrepreneurship Division of the Academy of Management. Please do not post messages with attached files. Commercial messages or spammed messages are not allowed on the list. The use of auto-responder "out-of-office" messages may also lead to your removal from the list. You can manage your subscription options, including joining or leaving the list here: http://aomlists.pace.edu/scripts/wa.exe?SUBED1=entrep&A=1 If you have questions or need help, please contact Dr. John Bunch jbunch@benedictine.edu. Ventures HO!