Skip to main content

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

  • Herman Mark Schwartz

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.

Corresponding author
* Corresponding author: Herman Mark Schwartz, Politics Department, University of Virginia Charlottesville, VA, e-mail:
Hide All

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.

Hide All
Aglietta, Michel. 2000. A Theory of Capitalist Regulation: The US Experience. London: Verso.
Autor, David. 2003. “Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing.” Journal of Labor Economics 21 (1): 142.
Baily, Martin Neil, and Bosworth, Barry P.. 2014. “US Manufacturing: Understanding Its Past and Its Potential FutureThe Journal of Economic Perspectives 28 (1): 325.
Barth, Erling, Bryson, Alex, Davis, James C., and Freeman, Richard. 2014. “It's Where You Work: Increases in Earnings Dispersion Across Establishments and Individuals in the US.” National Bureau of Economic Research, working paper 20447. Chicago: NBER.
Bessen, James, Meurer, Michael, and Laurissa, Jennifer. 2011. “The Private and Social Costs of Patent Trolls.” Boston University School of Law, Law and Economics Research Paper 11–45. Boston: Boston University.
Block, Fred, and Keller, Matthew R., eds. 2011. State of Innovation. London: Paradigm Publishers.
Boldrin, Michele and Levine, Daniel. 2008. Against Intellectual Monopoly. New York: Cambridge University Press.
Buchanan, James M. 1965. “An economic theory of clubs.” Economica 32 (125): 114.
Van Dijk, Bureau. 2015. “Osiris: Information on Listed Companies, Global.” (Accessed October 18, 2015).
Campbell, John and Lindberg, Leon. 1990. “Property Rights and the Organization of Economic Activity by the State.” American Sociological Review 55 (4): 634647.
Chandler, Alfred. 1977. The Visible Hand: The Management Revolution in American Business. Cambridge, MA: Belknap.
Christophers, Brett. 2016. The Great Leveler: Capitalism and Competition in the Court of Law. Cambridge, MA: Harvard University Press.
Demsetz, Harold. 1974. Toward a Theory of Property Rights. Basingstoke: Palgrave Macmillan.
Dobbs, Richard, Koller, Tim, Ramaswamy, Sree, Woetzel, Jonathan, Manyika, James, Krishnan, Rohit, and Andreula, Nicolo. 2015. Playing to Win: The New Global Competition for Corporate Profits. New York: McKinsey Global Institute.
Doctorow, Cory. 2014. Information Doesn't Want to be Free. San Francisco, CA: McSweeney's.
Doidge, Craig, Karolyi, Andrew, and Stulz, René. 2015. “The US listing gap.” United States National Bureau of Economic Research working paper w21181. Chicago: NBER.
Drahos, Peter, and Braithwaite, John. 2002. Information Feudalism: Who Owns the Knowledge Economy? New York: The New Press.
Dyson, Kenneth. 1986. “The State, Banks and Industry: The West German Case.” In State, Finance and Industry. A Comparative Analysis of Post-War Trends in Six Advanced Industrial Economies, edited by Cox, Andrew. Brighton, UK: Wheatsheaf Books.
Ford Motor Co. 2015. Annual Report 2015. (Accessed June 8, 2016).
Furman, Jason, and Orszag, Peter. 2015. “A Firm-Level Perspective on the Role of Rents in the Rise in Inequality.” Presentation at “A Just Society” Centennial Event in Honor of Joseph Stiglitz Columbia University.
Gordon, Colin. 1994. New Deals: Business, Labor, and Politics in America, 1920–1935. New York: Cambridge University Press.
Hall, Bronwyn and Ziedonis, Rosemarie. 2001. “The Patent Paradox Revisited: An Empirical Study of Patenting in the US Semiconductor Industry, 1979–1995.” RAND Journal of Economics 32 (1): 101128.
Hall, Bronwyn and Ziedonis, Rosemarie. 2007. “An Empirical Analysis of Patent Litigation in the Semiconductor Industry.” University of California at Berkeley working paper 217–242. Berkeley, CA: University of California.
Hardin, Russell. 1982. Collective Action, Baltimore, MD: Johns Hopkins University Press.
Hurt, Shelley. 2010. “Science, Power and the State: U.S. Foreign Policy, Intellectual Property Law, and the Origins of Agricultural Biotechnology, 1969–1994.” Ph.D. dissertation New School for Social Research.
Katz, Lawrence and Krueger, Alan. 2016. “ The Rise and Nature of Alternative Work Arrangements in the United States, 1995–2015. ” Unpublished manuscript Cambridge, MA: Harvard University.
Lazonick, William. 2009. “The New Economy Business Model and the Crisis of US Capitalism.Capitalism and Society 4 (2): 167.
Lynn, Barry. 2009. Cornered: The New Monopoly Capitalism and the Economics of Destruction. New York: John Wiley.
Mazzucato, Marianna. 2013. The Entrepreneurial State: Debunking Public vs. Private Myths in Risk and Innovation. London: Anthem Press.
Online, Mergent. 2015. (Accessed August 30, 2015).
Organization for Economic Co-operation and Development (OECD). 2008. Growing Unequal: Income Distribution and Poverty in OECD Countries. Paris: OECD.
Organization for Economic Co-operation and Development (OECD). 2015. In It Together: Why Less Inequality Benefits All. Paris: OECD.
Olson, Mancur. 1965. The Logic of Collective Action. Cambridge, MA: Harvard University Press.
Ostrom, Elinor. 2010. “Beyond Markets and States.” The American Economic Review 100 (3): 641672.
Ostrom, Victor and Ostrom, Elinor. 1977. “Public Goods and Public Choices.” In Alternatives for Delivering Public Services: Toward Improved Performance, edited by Savas, Emanuel. Boulder, CO: Westview Press.
Pagano, Ugo and Rossi, Maria. 2009. “The Crash of the Knowledge Economy.” Cambridge Journal of Economics 33 (4): 665683.
Piore, Michael and Sabel, Charles. 1984. Second Industrial Divide. New York: Basic Books.
Sabel, Charles. 1982. Work and Politics: The Division of Labor in Industry. New York: Cambridge University Press.
Samuelson, Paul A. 1954. “The pure theory of public expenditure.” The Review of Economics and Statistics 36(4): 387389.
Schacht, Wendy. 2006. Patent Reform: Issues in the Biomedical and Software Industries. Congressional Research Service, available at: (Accessed April 7, 2006).
Schwartz, Herman Mark. 2016. The Russell Sage Journal of the Social Sciences. 2 (6): 226249.
Sell, Susan. 2003. Private Power, Public Law: The Globalization of Intellectual Property Rights. New York: Cambridge University Press.
Selmier II, W. Travis. 2017. “An Institutional Perspective on Governance, Power, and Politics of Financial Risk.” Business and Politics 19 (2): 215240.
Shapiro, Carl. 2001. “Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting.” March. Available at SSRN: (Accessed September 12, 2015).
Song, Jae, Price, David, Guvenen, Fatih, Bloom, Nicholas, and von Wachter, Till. 2015. “Firming up Inequality.” National Bureau of Economic Research working paper w21199. Chicago: NBER.
Stiglitz, Joseph. 2012. The Price of Inequality: How Today's Divided Society Endangers Our Future. New York: W. W. Norton & Company.
Veblen, Thorstein 1919. “On the Nature of Capital, I and II.” In The Place of Science in Modern Civilization and Other Essays, edited by Veblen, Thorstein. New York: Huebsch.
Veblen, Thorstein. 1963. The Engineers and the Price System. New Brunswick, NJ: Transaction Publishers.
Veblen, Thorstein. 1978. The Theory of Business Enterprise. New Brunswick, NJ: Transaction Books.
Vitols, Sigurt. 2001. “The Origins of Bank-Based and Market-Based Financial Systems: Germany, Japan, and the United States.” In The Origins of Nonliberal Capitalism: Germany and Japan in Comparison edited by Streeck, Wolfgang and Yamamura, Kozo. Ithaca, NY: Cornell University Press.
Weil, David. 2014. The Fissured Workplace. Cambridge, MA: Harvard University Press.
Weiss, Linda. 2014. America Inc.? Innovation and Enterprise in the National Security State. Ithaca, NY: Cornell University Press.
Williams, Karel, Haslam, Colin, Williams, John, Johal, Sukhdev, and Adcroft, Andy. 1994. Cars: Analysis, History, Cases. Providence, RI: Berghahn Books.
Womack, James, Jones, David, and Roos, Daniel. 1990. The Machine that Changed the World. New York: Simon and Schuster.
Zeitlin, Jonathan and Herrigel, Gary. 2000. Americanization and its Limits: Reworking US Technology and Management in Post-War Europe and Japan. New York: Oxford University Press.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Business and Politics
  • ISSN: -
  • EISSN: 1469-3569
  • URL: /core/journals/business-and-politics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


Full text views

Total number of HTML views: 4
Total number of PDF views: 71 *
Loading metrics...

Abstract views

Total abstract views: 361 *
Loading metrics...

* Views captured on Cambridge Core between 6th June 2017 - 20th April 2018. This data will be updated every 24 hours.