Reputations for Toughness in Patent Enforcement: Implications for Knowledge Spillovers via Inventor Mobility

Abstract

"Job hopping" by scientists and engineers is an important channel for knowledge diffusion. Little is known, however, about the effectiveness of actions firms take to reduce the outward flow of know-how and talent from their own organizations. Building on theories of reputation-building and strategic deterrence, this study investigates the moderating effects of corporate reputations for "toughness" in the enforcement of patents. Drawing on a unique database of enforcement activity, inter-firm inventor mobility events, and patent citations in the U.S. semiconductor industry, we find that a firm's litigiousness significantly curtails the dissemination of knowledge anticipated from employee departures, particularly to firms that are relatively disadvantaged to fund or withstand a legal dispute (i.e., that are small, young, or private). The overall effects are similar in magnitude for California-based firms relative to firms headquartered in other states. The study sheds new light on the strategic levers firms use to capture value from investments in human capital and R&D.

Keywords: Reputation, Corporate Strategy, Intangible Assets, Patents, Knowledge spillovers, employee mobility

JEL Classification: O32, J60