| HBS Working Paper Series
The Impact of Patent Wars on Firm Strategy: Evidence from the Global Smartphone Market
Strategy scholars have documented in various empirical settings that firms seek and leverage stronger institutions to mitigate hazards and gain competitive advantage. In this paper, we argue that such “institution-seeking” behavior may not be confined to the pursuit of strong institutions: firms may also seek weak institutions to mitigate hazards. Using panel data from the global smartphone industry and recent patent wars among key industry rivals, we examine how smartphone vendors that are not directly involved in patent litigation strategically respond to increased litigation risks in this industry. We find that as patent wars intensify, smartphone vendors strategically shift more of their business toward markets with weaker intellectual property (IP) protection because of institutional arbitrage opportunities. This shift is more pronounced for vendors whose stocks of patents are small and whose home markets have weak IP systems. Our study is the first to examine the relationship between heterogeneity in national patent systems and firms’ global strategies. It provides a more balanced view of firms’ institution-seeking behavior by documenting how they make strategic use of weaker institutions.
Keywords: patent wars;
intellectual property (IP) enforcement;
Lawsuits and Litigation;
Globalized Markets and Industries;