The New Institutional Economics made various contributions to the field of innovation management. Two specific areas of contribution are highlighted in this paper. The discussion of intellectual property protection starts with the classical concept of balancing the incentives to create new ideas against the benefits of society from disseminating these ideas. Whenever innovation processes become interactive and cumulative strong intellectual property protection may have dysfunctional effects raising the transaction costs in markets for technologies. These transaction costs play an important role in the second discussion addressed in the paper, which deals with the appropriability mechanisms of innovators. Starting with the strategies of innovating firms to obtain economic returns from their innovations the analysis ultimately proceeds to the “strange” appropriability mechanisms of small innovators in open source software development.