The Impact of Patent Wars on Firm Strategy: Evidence from the Global Smartphone Industry

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Strategy scholars have documented in various empirical settings that firms seek and leverage stronger institutions to mitigate hazards and gain competitive advantage. In this paper, we argue that such "institution-seeking" behavior may not be confined to the pursuit of strong institutions: firms may also seek weak institutions to mitigate hazards. Using panel data from the global smartphone industry and recent patent wars among key industry rivals, we examine how smartphone vendors that are not directly involved in patent litigation strategically respond to increased litigation risks in this industry. We find that as patent wars intensify, smartphone vendors not involved in any litigation focus more of their business in markets with weaker intellectual property (IP) protection because of institutional arbitrage opportunities. This strategic response is more pronounced for vendors whose stocks of patents are small and whose home markets have weak-IP systems. Our study is the first to examine the relationship between heterogeneity in national patent systems and firms' global strategies. It provides a more balanced view of firms' institution-seeking behavior by documenting how they make strategic use of weaker institutions.
Publisher
INFORMS
Issue Date
2016-11
Language
English
Article Type
Article
Keywords

INTELLECTUAL PROPERTY-RIGHTS; RESEARCH-AND-DEVELOPMENT; FOREIGN DIRECT-INVESTMENT; US INTERNET FIRMS; INSTITUTIONAL ENVIRONMENT; TECHNOLOGICAL CAPABILITIES; SEMICONDUCTOR INDUSTRY; CORPORATE GOVERNANCE; EMPIRICAL-ANALYSIS; UNITED-STATES

Citation

ORGANIZATION SCIENCE, v.27, no.6, pp.1397 - 1416

ISSN
1047-7039
DOI
10.1287/orsc.2016.1092
URI
http://hdl.handle.net/10203/244601
Appears in Collection
MT-Journal Papers(저널논문)
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