Abstract
Strategic patents have been defined as patents whose sole objective is neither to foster technological innovation and protect said innovation from imitation, but to block competitors from innovating in the same technological area. In this paper we provide empirical evidence on a negative impact of strategic patenting on a firm’s competitors. Consistent with theoretical implications of strategic patenting, we find that when firms strategically patent to defend their market position, overall market competition declines, as shown by the increase in HHI and significant drop in market entry. Additionally, we observe that strategic patenting reduces total factor productivity and patenting activity of firm competitors, especially in more technological and product-similar cases. Our results thus confirm that strategic patenting helps protect a firm's market niche by preventing competitors’ entry. These findings in turn lend further support to the theories regarding a generalized impact of strategic patenting on competition.
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