Patent Enforcement Strength and Collaboration: The Effect of Firm’s Litigiousness on Alliances.

Abstract

In this paper, we study the effect of the strength of the IP enforcement on firm’s collaborative activities. We argue that there are two potential contradicting forces driving the effect, namely, the expected return from learning during a collaborative project, and the expected cost of any unintended potential knowledge leakage during that project. Our results from a quasi-natural experiment, exploiting the reduction of the IP enforcement due to a recent landmark event in the U.S. patent system (the ruling in eBay v. MercExchange), show that weaker property rights, on average, lead to fewer collaborations and alliances. To get additional insights, we also investigate the effect on particular types of collaborations, as well as in settings where the two mechanisms may be strengthened or weakened.