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Intellectual Property and Startups

Startup India is a flagship initiative of the Government of India, designed along with Make in India, Skill India, Digital India and Ease of Doing Business in India. While these programs aim at building stronger industrial capabilities in general, Startup India aims to build a strong ecosystem to nurture innovation and entrepreneurial traits among the youth. Initial outcomes of Startup India and data on startups’ growth, investment and employment at the national level suggest an unusual dynamism.  However, knowledge on micro level dynamics is very limited. In this context, this research project aims at gathering micro level evidence, and with their help steps up to policy analysis.

By definition, a startup is a newborn or novice. Accordingly, three significant characteristic features of  startups are: (i) a new/unique product or technological innovation on which the startup is based, (ii) relatively lower levels of absorptive capacity (Cohen and Levinthal, 1990), (iii) lack of access or absence of complementary assets and innovations (Teece and Pisano, 1994). The immediate effect of the above features is a threat to the appropriability from innovation, i.e. profiting from innovation, where the incumbent followers/imitators, suppliers, and customers in the industry appropriate lion’s share of profit generated from a startup innovation (Teece, 1986). Precautionary actions firms adopt here are (i) legally protecting their intellectual properties, and (ii) forming contractual and IP partnerships. Innovation   management literature have identified five usual types of IP partnerships in technology driven industries, viz, (i) IP licensing, (ii) technology licensing, (iii) IP based component business, (iv) contract R&D, (v) joint venture. The major outcome of such partnerships is that here, a startup simultaneously acts as an IP producer and consumer. Interestingly, it is the IP consumer feature that enables startup firms to overcome their major challenge, i.e. building complimentary capabilities and innovations in order to ensure a larger share of profit from innovation.

In the above discussed setting, this research project primarily attempts to understand the patterns and role of contractual and IP partnerships of selected startups in developing their dynamic capabilities. Secondly, the project aims to critically analyse how far the Government of India’s Startup Action Plan 2016 addresses the issues related to such partnerships of startup firms, and suggest the required policy reforms. Finally, the project aims to suggest a more inclusive definition of startup’s ecosystem for the purpose of official recognition. This objective comes from a compelling context that about 98 percent of Indian startups are not officially recognised by DIPP. This dilemma of informalization results when a definition and policy fails to address country-specific industrial features, but is rather encouraged by models from advanced industrial countries.

Principal Investigators: Mr Yogesh Pai and Dr Arul George Scaria

Research Fellow: Mr Satheesh Menon