Inter-Firm Patent Litigation and Innovation Competition

69 Pages Posted: 14 Dec 2018 Last revised: 16 Dec 2019

See all articles by Jongsub Lee

Jongsub Lee

University of Florida - Warrington College of Business Administration

Seungjoon Oh

Peking University - HSBC School of Business

Paula Suh

University of Georgia - Terry College of Business

Date Written: December 16, 2019

Abstract

Using novel inter-firm patent litigation data, we show that defendant firms become financially constrained, reduce innovation activity, and shift toward exploitative innovation leveraging past experience and expertise. The exploitative innovation strategy reflects the patent race motives and hedging demand of defendant firms against future litigation. These real consequences of patent litigation are evident among firms in similar product markets, indicating significant interplay between intellectual property rights' boundaries and product market dynamics. We also find significant litigation risk spillover within industry. Using China's participation in the Trade-Related Aspects of Intellectual Property Rights Agreement as an instrument, we alleviate potential endogeneity concerns.

Keywords: Inter-Firm Patent Litigation, Intellectual Property Rights Boundary and Product Market Dynamics, Financial and Real Consequences of Patent Litigation, Innovation Activity, Innovation Strategy

JEL Classification: G30, K41, L24, O32, O34

Suggested Citation

Lee, Jongsub and Oh, Seungjoon and Suh, Paula, Inter-Firm Patent Litigation and Innovation Competition (December 16, 2019). Available at SSRN: https://ssrn.com/abstract=3298557 or http://dx.doi.org/10.2139/ssrn.3298557

Jongsub Lee

University of Florida - Warrington College of Business Administration ( email )

Department of Finance Insurance & Real Estate
P.O. Box 117168
Gainesville, FL 32611-7168
United States
352-273-4966 (Phone)
352-392-0301 (Fax)

Seungjoon Oh

Peking University - HSBC School of Business ( email )

University Town
Shenzhen, 518055
China

Paula Suh (Contact Author)

University of Georgia - Terry College of Business ( email )

600 S. Lumpkin Street
Amos Hall, B314
Athens, GA 30602
United States

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