Managerial Cognitive Capability Approach to Reactive Patent Litigation Strategy

Abstract

The microfoundations of dynamic capabilities facilitating strategic change is an emerging theoretical and empirical issues in the field of strategic management. To date, the cognitive underpinnings of dynamic managerial capabilities remain largely unexplored. Patent litigation is a common strategic behavior that is used in a variety of business domains. However, previous studies investigating whether patent litigation is effective at creating barriers to competition mainly take the plaintiff's perspective. Using the information-based, rivalry-based, resource-based, and mental model theories, the authors take the defendant's managerial cognitive capability perspective and build a rational, normative model of the combined influences of exogenous and endogenous forces by incorporating the strategic intent perspective to explore the defendant's decision of whether to conduct or abstain from launching reactive patent litigation. Results of an experimental design using a sample of top executives shows that exogenous factors (asymmetric information, strategic group membership, and market positions), endogenous factors (organizational slack and analogical reasoning approach), and CEOs' personality characteristics (strategic intent perspective) affect CEO behavior intentions to launch a reactive patent litigation strategy. These findings broaden information-based, rivalry-based, resource-based, and mental model theories' explanations of reactive patent litigation decisions, and enable the formulation of codes of conduct for managerial cognitive capability in regard to legal astuteness in patent litigation.