Navigating the Ambivalence of Innovation: Knowledge Diffusion and IPP in High-Tech Industrial Clusters.

The research highlights the ambivalence of innovation, discussing its inherent tendency to diffuse while simultaneously creating a demand for Intellectual Property Protection (IPP). The case of high-technology industrial clusters, particularly Silicon Valley’s success, demonstrates how favouring the spread of knowledge over appropriability mechanisms can enhance innovation in the economy. The paper challenges the vertical orientation of a ‘firm-based’ ecosystem, which tends to keep the innovation’s results within the company’s boundaries. In contrast, it supports the horizontal and external orientation of a ‘network-based’ system that relies on technological spillovers, cooperation, imitation and competition among firms. Regarding IPP, the study introduces two different appropriability instruments: patents and trade secrets (with the related non-compete clauses). The scope of the analysis and the existing relationship between trade secrets and patents ultimately lead to a focus on patents, which is the main topic of the first part. To support its position, the research: a) analyses several papers and articles that explore the dual nature of innovation, the complexities of IPP (especially the patent system), and the role of industrial clusters in fostering technological advancement; b) demonstrates the critical aspects of the patent system in promoting innovation and providing a true solution to secrecy; c) uses game theory to illustrate the individual incentive to patent innovations in a one-time game, as well as the potential for cooperative equilibrium in the repeated interactions within industrial clusters; d) defends the idea of a competitive market for innovation that freely diffuse ideas and promote cooperation; and e) concludes with policy recommendations aimed at prioritising knowledge sharing over stringent IPP, underscoring Silicon Valley’s unique ability to create a network of competitive and collaborative relationships. The thesis represents a pure economic theory analysis. As such, it can serve as a foundational basis for future research and empirical validation.