Profiting from innovation in the digital economy: Enabling technologies, standards, and licensing models in the wireless world

David J. Teece revisits his seminal Profiting from Innovation (PFI) framework to address the complexities of the modern digital economy. While the original framework focused on how firms capture value from discrete, commercially viable innovations, the current landscape is dominated by digital convergence, multi-level platforms, and enabling technologies. These factors have fundamentally altered the dynamics of value capture, making it increasingly difficult for innovators to secure a fair share of the economic returns they generate.

Enabling technologies—often referred to as junior general-purpose technologies—are essential for downstream innovation across multiple industries. However, their broad applicability makes them difficult to protect. Unlike simple product innovations, enabling technologies often require extensive coordination with external complementors. Because the innovator cannot realistically own all necessary downstream assets, they are frequently forced to rely on licensing. This model is often inadequate, as patent enforcement is costly, and courts may be reluctant to grant the injunctions necessary to prevent free-riding by implementers.

Digital convergence has shifted the competitive arena from individual products to complex ecosystems. Platforms act as hubs that integrate hardware, software, and services, requiring a delicate balance of cooperation and competition. The paper introduces a granular taxonomy of complementarity, emphasizing that technological and innovational complementarities—where the value of an innovation depends on the creation or re-engineering of other technologies—pose the greatest coordination challenges. When these complements are controlled by separate entities, they can become bottleneck assets that drain value away from the original innovator.