Abandonment of Patented Inventions in an Emerging Economy: How Would Peers’ Decisions Matter?

Abstract

This study applies the inter-organizational imitation perspective to analyze a firm’s decision of abandoning invention efforts in a technological space. In particular, a growing number of peers’ abandonment decisions in a technological space would impose the institutional pressure on the focal firm to follow the crowd, and has implications for its abandonment decision in the same technological space. Moreover, the impact of peers’ abandonment decisions is contingent on how the focal firm frames its abandonment decision in the gain versus loss domain. Studying Chinese publicly listed firms’ abandonment decision, we document a higher likelihood of the focal firm’s abandonment decision in a technological space where it observes more peers’ abandonment decisions. Moreover, the imitation impact is weakened when firms have superior downstream capability or are financially performing well.