Weak Intellectual Property Research Articles

Intellectual property protection intensity and regional technological innovation structure: Based on the perspective of economic complexity theory

Exploring the intrinsic link between the intensity of intellectual property protection and the optimization of regional technological innovation structure from the perspective of economic complexity theory. Using panel data and employing the dual fixed effects estimation method, we empirically examine the impact of intellectual property protection strength on innovation factors, the innovation environment, and innovation output. Our study finds that intellectual property protection has a positive incentive effect on knowledge acquisition, knowledge creation, the innovation environment, and substantive innovation, while it inhibits non-substantive innovation. Strong intellectual property protection effectively promotes the optimization of innovation factors, the innovation environment, and innovation output structures, thereby driving the optimization of the regional technological innovation structure. In terms of impact magnitude, the order from high to low is: knowledge creation, substantive innovation, innovation environment, knowledge acquisition, and non-substantive innovation. The “optimal intensity” of intellectual property protection significantly promotes the optimization of the regional technological innovation structure, whereas excessively strong or weak intellectual property protection hinders this optimization. Implementing a strategy of innovation-driven development requires further reform and improvement of the national intellectual property protection system to establish the optimal intensity of protection and promote the optimization of the regional technological innovation structure.

Return to the United States: Impact of Reshoring Announcements and Reshoring Risks on Market Valuation

With soaring labor and logistics costs in developing countries, supply chain disruptions during the COVID-19 pandemic triggered Western firms to “reshore” some of their offshore operations (performed in-house or outsourced) for certain strategically important products or production processes from foreign countries to their home countries. Although reshoring can create more domestic jobs and reduce supply chain risks, the impact of various external and internal risks associated with reshoring on market reaction remains unclear. This observation motivates us first to conduct a text mining analysis, revealing four important types of reshoring risks inherent to (1) foreign currency fluctuation, (2) intellectual property (IP) protection, (3) reshoring types (in-house, insourced, or outsourcing-to-outsourcing (OTO)), and (4) reshoring location choice (Republican- versus Democrat-led states). We then examine how these risk factors help explain the variations in reshoring’s market valuation based on 281 reshoring initiatives of 132 publicly traded firms in the United States announced between 2009 and 2022. Our empirical analysis reveals that the market reacts more positively to a firm’s reshoring announcement when the firm reshores under a high-currency-fluctuation environment or from countries with weak IP protection. However, the market’s reaction is more negative when the firm’s reshoring announcement entails insourced reshoring operations or when the reshored location is a Democrat- rather than Republican-led state. We do not find a significant market reaction to OTO reshoring. This paper was accepted by Vishal Gaur, operations management. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.00599 .

Characteristics of Litigated Patents in Weak Intellectual Property Rights Regimes

Characteristics of Litigated Patents in Weak Intellectual Property Rights Regimes

How does Economic Policy Uncertainty affect Green Innovation?

This study aims to examine the impact of economic policy uncertainty (EPU) on green innovation in the Chinese context. When economic policies are changed often, the Economic Policy Uncertainty (EPU) index rises. There is a dearth of studies examining how EPU affects corporate green innovation. This research shows that between 2007 and 2021, Economic Policy Uncertainty (EPU) would have a negative impact on green innovation inside Chinese corporations. Budgetary restraints cushion green innovation from the negative effects of Economic Policy Uncertainty (EPU). Subsidies for the environment provided by the government may help reduce EPU. Eco-friendly innovation is negatively connected with EPU, especially for privately owned businesses, those in less competitive sectors, and those in locations with weak intellectual property protections. This research suggests that in order to encourage environmentally responsible business innovation, authorities should increase the proportion of public monies spent on environmental protection and IP rights protection. Green innovation is more prevalent in times of high economic policy uncertainty. Different provinces, with varying degrees of marketization and FDI, display varying degrees of Economic Policy Uncertainty (EPU). The findings show that Environmental Policy Uncertainty (EPU) has a greater impact on green innovation in locations with higher degrees of marketization and trade openness compared to regions with lower levels of marketization and trade openness. The current study may be used to the investigation of government methods for fostering environmentally friendly innovation in the face of policy ambiguity.

The effects of Tech‐Fin on corporate innovation: Evidence from China

AbstractThis paper uses the multi‐period difference‐in‐differences (DID) method to empirically test the effects of Tech‐Fin on the innovation output of companies based on a quasi‐natural experiment to examine China's Tech‐Fin pilot city reform. We find that Tech‐Fin significantly increased the innovation output of high‐tech companies in the pilot cities and in cities with weak intellectual property protection. In addition, Tech‐Fin had no significant effects on the innovation output of pseudo‐high‐tech companies and technology‐intensive high‐tech companies. We further find that Tech‐Fin motivated high‐tech companies to increase their innovation output through innovation correction and risk‐smoothing effects.

Intellectual property rights policy and foreign direct investment: A quasi‐natural experiment from China

AbstractOver the past 40 years of reform and opening up, China has attracted a large number of foreign investment. However, because of China's weak intellectual property protection environment, it is difficult to protect the intellectual assets of transnational enterprises, which will affect their investment decisions to some extent. In order to optimize the intellectual property system and improve the intellectual property environment, national intellectual property demonstration city policy was proposed in 2012 to improve the institutional environment. To explore the impact of national intellectual property demonstration city policy on foreign capital inflow, we explore the relationship between national intellectual property demonstration city and foreign direct investment (FDI) using the multi‐period differences‐in‐differences (DID) method based on city panel data of China from 2003 to 2019. Results shows the following: (1) Compared with non‐demonstration cities, national intellectual property demonstration cities are profit to FDI promotion. If a city is rated as a national intellectual property demonstration city, local FDI will increase by 5% on average. After a series of robustness tests, the conclusion is still tenable. (2) We find that the national intellectual property demonstration city policy has obvious urban heterogeneity. The effect of national intellectual property demonstration city policy on the increase in FDI is more significant in central cities, western cities, and key cities. (3) The mechanism test shows that national intellectual property demonstration city policies have a positive effect on FDI through increasing the government's strategic expenditure on intellectual property, improving urban technology innovation capacity, optimizing human capital structure, and promoting the marketization of cities. Therefore, China should continue to implement the policy of national intellectual property demonstration city, especially increasing the number of national intellectual property demonstration city in key cities, central cities, and western cities. On the one hand, these findings can help government evaluate the attractiveness of demonstration cities for FDI. On the other hand, it also provides relevant policy enlightenment for the Chinese government to select appropriate demonstration cities and further refine and implement the national intellectual property demonstration city policies.

Economic policy uncertainty and green innovation: Evidence from China

Frequent economic policy adjustments lead to significant increases in economic policy uncertainty (EPU). Few studies have investigated whether EPU influences corporate green innovation. Using a sample of Chinese A-share listed firms from 2005 to 2019, we find strong evidence that EPU is significantly and negatively associated with corporate green innovation. Our moderating effect analysis shows that financial constraints exacerbate the negative impact of EPU on green innovation, while government environmental subsidies can significantly mitigate the negative EPU effect. Moreover, the negative relationship between EPU and green innovation is salient in privately owned enterprises, firms with less industry competition, and firms in regions with weak intellectual property protection. This study has important implications for policymakers regarding increasing government expenditure on environmental protection and strengthening intellectual property protection to promote corporate green innovation. • EPU negatively impacts corporate green innovation. • Financial constraints exacerbate the negative impact of EPU on green innovation. • Government environmental subsidies can significantly mitigate the negative EPU effect. • Strengthening intellectual property protection can promote green innovation.

From imitation to innovation: examining the technology-related change process in a transitioning Chinese economy

This article examines a technology-related change process in a transitioning Chinese economy by identifying the pressures for deinstitutionalization and the moderating factors that affect a practical example of its implementation. The analysis is underpinned by the Cunningham (2002) model of organizational change, and the study focuses on the case of ANTA Sports Products Ltd., a Chinese sporting goods manufacturer undergoing an organizational change from imitation to innovation. Data were gathered from official and semiofficial documents and four semistructured interviews. The main findings are as follows: (1) a glut of low-end products, Chinese consumers’ positive technology readiness and growing sense of Chinese patriotism, and internal political pressures were particular stressors for ANTA; (2) tax preferences provided ANTA with a strong motive to promote its change process, while weak intellectual property rights and institutional protections had the opposite effect; and (3) ANTA’s access to affordable resources, the CEO’s determination, the elimination of the alternative, and the dependence upon consumers for resources ensured its successful implementation of organizational change.

Do cross‐border patents promote trade?

AbstractWhile we would expect that cross‐border patents are used to protect a technology that is made available in another country, that technology could either be produced locally or imported. International patent filings could therefore be either complements or substitutes to international trade. This study combines data on patenting and trade for 149 countries and 249 industries between 1974 and 2006 with a “three‐way” panel data model that addresses several biases emphasized in the trade literature in order to provide a systematic analysis of how bilateral trade responds to cross‐border patent filings. We find that cross‐border patents have a positive (complementary) overall effect on the patent‐filing country's exports to the patent‐granting country and no effect overall on imports flowing in the opposite direction. These effects vary substantially across industry groups, with patents promoting significantly more export growth in industries with a high demand elasticity and in industries that are relatively more downstream in supply chains. We also find that patents, once obtained, are associated with increased trade even in jurisdictions with weak intellectual property regimes.

Characteristics of litigated patents in weak intellectual property rights regimes: Evidence from China

Characteristics of litigated patents in weak intellectual property rights regimes: Evidence from China

The impact of the Shanghai–Hong Kong stock market connection on corporate innovation: Evidence from mainland China

AbstractThe Shanghai stock market and the Hong Kong stock market were connected by the Chinese government in 2014, allowing Hong Kong investors to trade on a group of stocks on the Shanghai stock market. Using a difference‐in‐differences approach, we examine how this stock market connection affects corporate innovation in mainland China. We argue, and find, that the stock market connection enhances the informational feedback effect of stock prices and involves more‐sophisticated investors' monitoring and advising on firm management, and thereby spurs corporate innovation. We further show that the positive effect of the stock market connection on innovation is more pronounced for non‐state‐owned firms, firms with few political connections, firms with weak intellectual property rights protection or firms that are headquartered in non‐high‐tech economic zones. Our study sheds light on how the opening of a developing stock market to a more developed stock market shapes corporate innovation.

Perceived importance of intellectual property protection methods by Korean SMEs involved in product innovation and their value appropriation

ABSTRACT We investigate the sectoral patterns of relationships between SMEs’ perception of the importance of intellectual property (IP) protection methods and their value appropriation from innovation in countries with weak IP rights regime. By using a Heckman selection model to analyze 1,020 Korean SMEs involved in product innovation, we find that formal IP rights have a lower contribution to appropriation than the expected level. Instead, we find some positive links between SMEs’ affirmative perception of informal means of IP protection, particularly complex design, and their appropriation in both complex and discrete sectors. We discuss IP management and policy implications for enhancing the SMEs’ value appropriation.

Do R&D investments in weak IPR countries destroy market value? The role of internal linkages

AbstractResearch SummaryThe growth of emerging economies has attracted R&D investments by multinational enterprises, but firms have struggled to protect their knowledge assets in these environments with weak intellectual property rights protection. Knowledge misappropriation may be reduced if firms use cross‐unit R&D teams to strengthen intra‐firm interdependencies and control. We examine the relationship between such internal linkage strategies, foreign R&D investments, and firm market valuation in a dynamic market valuation model for 117 leading multinational firms. While foreign R&D investments are positively associated with market value, IP risks in host countries reduce it. The latter effect disappears if firms have developed a pronounced internal linkage strategy in weak IP environments. Linkage strategy bears costs and, in the absence of IP risks, is negatively associated with market value.Managerial SummaryThe growing market potential of emerging economies has led to an increase in research & development (R&D) activities there by multinational firms. A known challenge to multinational R&D investors in these economies is the weak protection of intellectual property rights (IPR). Firms may seek to reduce the risks of local knowledge spillovers and IPR infringement by actively embedding internal linkages in the organization of R&D and relying on cross‐unit international R&D teams. We examine the consequences of such an internal linkage strategy for the performance effects of firms’ investments in weak IPR countries. Based on an analysis of 1763 cross‐border R&D investments by 117 leading multinational firms, we find that a firm's market value is negatively affected by new R&D investments in weak IPR countries, but that such a negative influence can indeed be mitigated if the firm's R&D organization embeds internal linkages. Consistent with this observation, we demonstrate that firms with an internal linkage strategy are able to limit local knowledge outflows in weak IPR environments. However, if an internal linkage strategy is applied in strong, rather than weak, IPR environments, it bears substantial costs and negatively affects performance.

R&D Investments and Tax Incentives: The Role of Intra‐Firm Cross‐Border Collaboration*

ABSTRACTU.S. multinational corporations increasingly use intra‐firm, cross‐border research collaboration to disperse R&D across different countries. This paper investigates the implications of such collaboration on the abilities of firms to garner benefits from R&D tax incentives. We find that the association between R&D intensity and tax incentives is three to five times larger when firms have extensive cross‐border collaboration connected to a country. We also find that the effect is stronger when local intellectual property protection is weaker and when local innovation resources are higher. Our results suggest that cross‐border collaboration helps firms achieve more tax‐efficient R&D investments both by reducing the nontax frictions posed by weak intellectual property protection and by increasing the nontax benefits of foreign R&D.

Editorial: The Innovation and Project Management Department in the Journal of Operations Management

Editorial: The Innovation and Project Management Department in the <i>Journal of Operations Management</i>

Patent Premium for Foreign Firms Innovating in Emerging Markets

Weak intellectual property rights (IPR) protections in emerging markets pose a critical challenge to foreign firms attempting to appropriate returns from innovations in these markets. This study investigates the extent to which foreign firms in emerging markets, if they do so at all, obtain a patent premium, defined as an incremental productivity gain from a firm’s patents that it would not obtain had it not owned any patents. Drawing on theoretical insights from institutional theory and the liability of foreignness (LOF) logic, and using a panel dataset representing the performance of 32,901 firms in China’s high-tech industries, we find that foreign firms do obtain a patent premium despite the country’s weak IPR protection. The level of the patent premium is, however, significantly lower for foreign firms than for domestic firms, consistent with the LOF logic. We also find that a foreign firm’s patent premium increases substantially with institutional development, and to an even greater extent among wholly owned foreign subsidiaries (WOSs) than among international joint ventures (IJVs). This finding offers further support for the LOF logic insofar as institutional development lowers the LOF for foreign firms, particularly for WOSs. These findings provide implications for foreign firms regarding their innovation strategies in emerging markets with weak IPR protections and for host-country governments when formulating their innovation policies.

Intellectual Property Rights and the Protection of Innovations

I study how weak intellectual property rights (IPR) regimes affect firms’ innovation protection strategies. I build on transaction cost economics to explain four strategies to address not only the weak institutional IPR of ineffective regulatory and judicial systems traditionally discussed, but also the new weak technological IPR arising from the spread of digital technologies that facilitate the unauthorized diffusion of IPR. The four innovation protection strategies are (1) Defense, which is the traditional strategy of investing in legal defense to deter imitation in conditions of strong institutional and technological IPR; (2) Obsolescence, in which firms invest to make their innovations obsolete to reduce imitation in situations of strong institutional but weak technological IPR; (3) Complexity, in which firms invest in increasing the complexity of innovations to reduce imitation in situations of weak institutional but strong technological IPR; and (4) Convenience, in which firms invest in the convenient platforms to reduce incentives for imitation in conditions of weak institutional and technological IPR. These ideas question the usual argument of weak IPR leading firms to reduce investments by proposing instead the increase in investments to induce the transformation of the lack of formal transactions between firm and imitators into formal contractual relationships.

The Influence of Political Capabilities and Diplomatic Relations on Innovation Offshoring

Firms can derive significant benefits from locating innovation activities in foreign countries. Yet, such offshoring of innovation activities comes with notable downsides, particularly the risk of innovation misappropriation in host countries with weak intellectual property rights (IPR) regimes. Although prior research has focused on how firms attempt to manage this downside risk through innovation-specific remedies and knowledge protection strategies, the role of firm nonmarket capabilities, notably political capabilities, has thus far been largely overlooked. We argue that firm political capabilities can help protect firms from the possible misappropriation of their intangible resources in weak IPR regimes, but that this effect will only materialize when a firm’s home and host countries maintain favorable diplomatic relationships. Our theorizing thus considers multiple levels of political influence that affect a firm’s ability to overcome the risks associated with weak IPR regimes. We find support for our predictions in a sample of 479 innovation offshoring investments made by 102 firms from 12 home countries over the period 2003-2010.

Alleviating concerns of misappropriation in corporate venture capital: Creating credible commitments and calculative trust

Ventures are often hesitant to accept corporate venture capital due to concerns of intellectual property misappropriation. This is likely to be especially true with startup stage ventures operating in weak intellectual property rights regimes. Drawing on transaction costs economics and game theory, we examine how corporate investors might alleviate concerns of misappropriation by establishing credible commitments to their corporate venture capital program, which discourages opportunistic behavior. We submit that corporate investors can demonstrate credible commitments through prior investment quantity and prior investment continuity, therefore increasing the chances of forming a corporate venture capital–venture investment relationship. Our findings—using data from 11,136 ventures, 300 corporate venture capital investors, and 1782 investments across 18 years—demonstrate that ventures are more likely to pair with corporate venture capital investors that have made a credible commitment to their corporate venture capital program. Also, we find evidence that both quantity and continuity possess an enhanced effect on alleviating fears of misappropriation when a startup venture operates in the same industry as a potential corporate venture capital partner; this is because the corporate venture capital investor possesses both the absorptive capacity to understand the venture’s intellectual property and complementary capabilities to beat them to market.

Competition Order and Innovation Behaviors of Enterprise in China

This study addresses the apparent puzzle that China made great progress in mobile phone manufacturing despite weak intellectual property protection. Using the China 2012 Enterprise Surveys Data set of World Bank enterprises survey, we investigated whether competition order mattered for innovation behaviors of enterprise and mainly drew three major conclusions. First, when there are unregistered or informal competitors in the market, enterprises tend to choose innovation to improve the current situation of their own operations, and they may increase the R&amp;D investment. Second, when the unregistered or informal competitors in the market become obstacles to the enterprise, with the rise of disorderly barriers to competition, enterprises will reduce their decision-making of innovation behavior or the intensity of R&amp;D investment. Third, the impartiality degree of court may have a moderating effect on the relationship between competition order and corporate innovation behavior.