The role of appropriability in sustaining competitive advantage - an electronic auction system case study

This paper reviews the process of innovation in the introduction of an electronic auction system for livestock. The growth and development of the system is tracked over a number of years and factors accounting for success and failure are analysed. Previous models of the innovation process provide useful and powerful frameworks for explaining the developments. The growth of 'trust' in the system was found to be an important additional factor in determining successful innovation. Appropriability, defined in terms of the ability of the system's licensor to benefit from the innovation more fully than other stakeholders, is used to determine the Competitive Advantage each of the stakeholders has gained through the innovation. Many of the gains accrued to stakeholders other than the licensor and the long-term changes in the appropriability regime were found to determine the long-run sustainability of the Competitive Advantage. The system was the first of its type in the UK but this did not guarantee success given that a number of second-movers entered the market and were able to develop rival systems. However, early losses were weathered and strategies aimed at widening the scope of activities led to the ultimate success of the system. (C) 1998 Elsevier Science B.V. All rights reserved.