Abstract
A firm's external environment is composed of multifold organizations with diverse demands and interests. Ties with business, academic and political partners not only provide access to resources but also produce new dependencies and engender misappropriation risks. Patents system, as a formal and legal institution, protects IP by authorizing the legal right to exclude others from using the innovation and by enforcing coercive legal deterrence and infringement sanction. Regarding secrecy as a strategic alternative to patents system, this study explores how firms actively respond to external dependencies by comply, avoid, or escape the formal IP protection system. Based on China Innovation Survey of 1,406 firms, it finds that business dependence may bring about misappropriation and knowledge leakage, which keeps the focal firm away from disclosure and choose secrecy defense. Secondly, both the open science nature of the technology and reputation-based rewarding system in academic partners motivate the focal firm to comply with their goals and refer to patents system. Finally, political dependence could bring about risks when firms demonstrate distinctive value, which forces firms to escape from institutional attachments by adopting secrecy defense.
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