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

40 Pages Posted: 16 Oct 2013 Last revised: 29 Sep 2016

See all articles by Yongwook Paik

Yongwook Paik

KAIST College of Business, Korea Advanced Institute of Science and Technology (KAIST)

Feng Zhu

Harvard University - Harvard Business School

Date Written: September 26, 2016

Abstract

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.

Keywords: patent wars; patent litigation; intellectual property (IP) enforcement; patent thicket; smartphone; platform-based markets; platform competition

JEL Classification: M21, O34, O43, P48, K42, L26

Suggested Citation

Paik, Yongwook and Zhu, Feng, The Impact of Patent Wars on Firm Strategy: Evidence from the Global Smartphone Industry (September 26, 2016). Available at SSRN: https://ssrn.com/abstract=2340899 or http://dx.doi.org/10.2139/ssrn.2340899

Yongwook Paik (Contact Author)

KAIST College of Business, Korea Advanced Institute of Science and Technology (KAIST) ( email )

85 Hoegiro, Supex Building Room 482
Seoul, 02455
Korea, Republic of (South Korea)

Feng Zhu

Harvard University - Harvard Business School ( email )

Soldiers Field Road
Morgan 431
Boston, MA 02163
United States

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=14938

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