Intellectual Property Bundle (IPB) theory: Managing transaction costs in technology development through network governance

Technology is a bundle of inventions, which are increasingly protected by intellectual property rights. Typically, these rights are owned by multiple different entities, operating in different industries and countries. Moreover, once an invention protected by intellectual property right is incorporated in a product, it becomes very difficult to substitute it with an alternative technology, especially when the product has been widely adopted. Thus, technology creators must coordinate the disparate interests of various intellectual property owners in order to create useful technology. In this paper we introduce a new theory as an extension of transaction cost economics to explain the relative merits of different governance forms vis-à-vis the creation of technology that is a bundle of inventions. From this theoretical extension, we derive a number of testable hypotheses.