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Club goods, intellectual property rights, and profitability in the information economy†

Published online by Cambridge University Press:  06 June 2017

Herman Mark Schwartz
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Abstract

Are club goods becoming more widespread in developed economies, and, if so, what is the broader significance of this trend? Club goods are as salient for the profitability of non-financial firms as for finance. First, corporate strategy today largely revolves around the generation or acquisition of intellectual property rights and other club/franchise goods. Second, financialization is not just about the credit relationship between financial firms on the one side and non-financial corporate and household borrowers on the other, but also about Main Street's ability to use financial power to suppress competition in its own markets. Third, firms’ strategic reliance on IPRs and club goods more generally has magnified both profit and wage inequality in the broader economy. This inequality combines with changes in corporate structure to produce a significant part of the household level income inequality we currently observe in the United States. Fourth, all these processes are ineluctably political, because the state necessarily constitutes club or franchise goods, just like any property right. But the quantity and quality of those property rights is an indeterminate outcome of struggles among firms over the size of and shares of the pool of profits in a given national and global economy.

Type
Research Article
Information
Business and Politics , Volume 19 , Special Issue 2: Property Rights, Financial Risk, and the Politics of a Networked Global Financial System , June 2017 , pp. 191 - 214
Copyright
Copyright © V.K. Aggarwal 2017 and published under exclusive license to Cambridge University Press 

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Footnotes

†

The author would like to thank John Echeverri-Gent, Peter Hall, Anastasia Nesvetailova, Ronen Palan and Bent Sofus Tranøy for discussion, comment, and criticism, and Steven Liao for help with data. Errors remain mine.

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