Rosemarie Ham Ziedonis Management Science, 2004

Slides:



Advertisements
Similar presentations
The Impact of R&D on Innovation and Productivity Professor Derek Bosworth Intellectual Property Research Institute of Australia Melbourne University.
Advertisements

Capital Structure Theory
The Well-being of Nations
Innovation and Technology. 2 R&D and market structure Technological development contributes decisively to economic growth. Modern economic growth relies.
Silverman – 1999, MS TECHNOLOGICAL RESOURCES AND THE DIRECTION OF CORPORATE DIVERSIFICATION: TOWARD AN INTEGRATION OF THE RESOURCE-BASED VIEW AND TRANSACTION.
1 What’s different about patents across industries? —and so what? Wesley M. Cohen Duke University Conference on Patents and Diversity in Innovation University.
GODFREY HODGSON HOLMES TARCA
Globalization, Veto Players and Welfare Spending Written by Eunyoung Ha Comparative Politics Pietro Besozzi.
Chapter 2: The External Environment: Opportunities, Threats, Industry Competition and Competitor Analysis Overview: The firm’s external environment.
OM 석사 2 학기 이연주 Markets for technology and their implications for corporate strategy Arora et al. (2001)
Technological Resources and the Direction of Corporate Diversification: Toward an Integration of the Resource- based View and Transaction Cost Economics.
 Don’t Fence Me In: Fragmented Markets for Technology and the Patent Acquisition Strategies of Firms Ziedonis, Rosemarie H. Management Science, 50 (6):
Chapter 9 New Business Development
Knowledge, Capabilities and Manufacturing Innovation: A US-Europe Comparison Stephen Roper, Jan Youtie, Philip Shapira and Andrea Fernandez-Ribas Contact:
Author: Villalonga, B. and McGahan, A. Strategic Management Journal, 26 (13): Presented by Nan Zhang.
PowerPoint Presentation by Charlie Cook Gordon Walker McGraw-Hill/Irwin Copyright © 2004 McGraw Hill Companies, Inc. All rights reserved. Chapter 7 Partnering.
1 Do Interest Groups affect Immigration? Giovanni Facchini University of Illinois and Università degli Studi di Milano Anna Maria Mayda Georgetown University.
Hospital Ownership Form and Quality Changes: Changes in Nurse Staffing and Failure-to-Rescue following the BBA of 1997 David K. Song, M.D., Ph.D. Kevin.
Political Winds, Financing Constraints and Pharmaceutical Innovation Joshua Linn (UIC) and Robert Kaestner (UIC and NBER) November 9, 2007 Presentation.
Product Characteristics, Competition and Dividends by Hoberg, Phillips, and Prabhala University of Maryland Discussion by Gustavo Grullon Rice University.
Do Cities Substitute for Internal Firm Resources? A Study of Advanced Internet Technology Adoption Chris Forman Avi Goldfarb Shane Greenstein.
Resource-Based and Property Rights Perspectives on Value Creation: The Case of Oil Field Unitization Jongwook Kim and Joseph T. Mahoney Managerial and.
Discussion of: M&A Operations and Performance in Banking by Beccalli and Frantz Emilia Bonaccorsi di Patti Bank of Italy Structural Economic Analysis Dept.
Beyond surveys: the research frontier moves to the use of administrative data to evaluate R&D grants Oliver Herrmann Ministry of Business, Innovation.
Ziedonis, Rosemarie H. Management Science, 50 (6):
The changing geography of banking – Ancona, Sept. 23 rd 2006 Discussion of: “Cross border M&As in the financial sector: is banking different from insurance?”
Copyright © 2005 Pearson Education Canada Inc. Concepts in ﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 3-1 Chapter 3 Environmental.
Paola Criscuolo, Toke Reichstein and Ammon Salter Tanaka Business School, Imperial College London Keld Laursen DRUID, Department of Industrial Economics.
“Who’s Suing Whom over What?” Patent Litigation in the Semiconductor Industry, Rosemarie Ziedonis STEP Board IP Meeting Washington, DC October.
Cooperative Strategy Cooperative Strategy
Strategic Patenting in Venture Capital Backed Firms Ed Egan BPP Student Seminar Presentation Fall 2010.
1 Alternative Mechanism for Technology Transfer: Licensing YoungJun Kim Department of Economics The George Washington University
The Impacts of Minimum Quality Standards on the Childcare Market V. Joseph Hotz (Duke) Mo Xiao (Arizona) NASM, 2008.
1 Arbitrage risk and the book- to-market anomaly Ali, Hwang and Trombley JFE (2003)
Negative underwriting loss turning into positive profit — Explore the role of investment income for U.S. Property and Casualty insurers Shuang Yang Department.
Does Academic Research Destroy Stock Return Predictability. R
The Choice Among Acquisitions, Alliances, and Divestitures
Presented by – Amit Darekar
Kyle J. Mayer, Deepak Somaya, & Ian O. Williamson
Real Options and Investment Mode: Evidence from
Birger Wernerfelt, MIT IIOC Boston April 8, 2017
Justus A. Baron Northwestern University
An Empirical Examination of Transaction- and Firm-Level Influences on the Vertical Boundaries of the Firm Leiblein, Michael.
Chapter 13 Diversification Strategy
Joseph B Nichols 2008 NASM of the Econometric Society June 21, 2008
Author: Konstantinos Drakos Journal: Economica
GODFREY HODGSON HOLMES TARCA
Technological Resources and the Direction of Corporate Diversification: Toward an Integration of the Resource-based View and Transaction Cost Economics.
Real Options: Taking Stock and Looking Ahead
The Choice Among Acquisitions, Alliances, and Divestitures
Grossman and Hart (1986) Journal of Political Economy
CHAPTER 13 Strategic Entrepreneurship
Friend or foe: Customer-supplier relationships and innovation
Is My Firm-Specific Investment Protected
Over-investment in corporate R&D, risk, and stock returns
Kirk Monteverde and David J. Teece (1982) Bell Journal of Economics
Corporate governance, chief executive officer compensation, and firm performance 刘铭锋
Capital structure, executive compensation, and investment efficiency
Diversification Strategy
Contemporary Models of Development and Underdevelopment
Private Equity Firms’ Reputational Concerns and the Costs
Financial development and innovation: Cross-country evidence
Political uncertainty and cash holdings: Evidence from China
Prepared by: Enrique, Lihong, John, Jongkuk
Environmental forecasting
Kirk Monteverde & David J. Teece (1982) The Bell Journal of Economics
Testing Alternative Theories of The Firm:
Joint Ventures and the Option to Expand and Acquire
Real options: Taking stock and looking ahead
Absorptive capacity: A new perspective on learning and innovation
Presentation transcript:

Don’t Fence Me In: Fragmented Markets for Technology and The Patent Acquisition Strategies of Firms Rosemarie Ham Ziedonis Management Science, 2004 Presented by – Amit Darekar

Objective and Research Question Identify the conditions under which an aggressive patenting strategy is an alternate mechanism that firms use to avoid being “fenced in” Research Question How do firms avoid being “fenced in” by owners of patented technologies in the design or manufacture of their products? Cumulative Innovation – important phenomenon for firm performance and economic growth. So earlier scholars have studied mechanisms that helps transfer technologies and know-how across organizations, such as – internal R&D programs, alliances, participation in professional communities, and hiring of employees. Literal meaning of “fenced in” is “being completely surrounded”. Reasons firms patent in complex industries include – Patent Blocking; improved capabilities to negotiate with owners of external patents; To deter patent infringement lawsuits Don't Fence Me In

Theory cont’d… Does strengthening patent rights promote or hinder cumulative innovation process? Pro – Optimal patent design literature – to induce sufficient R&D investments (Scothmer, 1991) Against – difficulties in IP-related transaction (Merges & Nelson, 1990) Recent literature on firm’s contracting problem in markets for technology Hold-up  TCE (Williamson, 1985) – Asset specificity. “Make-and-buy” vs. “Make-or-buy” decision Patent thickets – Solution? Invent around. Timing is crucial. E.g., Intel Vs S3 Hold ups – when one party is able to expropriate rents from another. Asset Specificity – costly to redeploy assets to alternative uses or users. TCE says that in Hold-ups, 2 things may happen, 1. Firms internalize transactions that involve highly specific assets; 2. Firms underinvest in areas where risks of expropriation are high. A valid patent gives its owner “exclusionary rights”, but not “affirmatory rights”. Simultaneous use and Duplicative inventions  Make-and Buy Vs Make-or-buy choice Patent Thickets – multiple, fragmentary patent owners, i.e. Diffuse entitlements Don't Fence Me In

Theory Societal welfare - Resource may be underutilized in case too many individual exclusionary rights (of too small a scale) are granted (“anti-commons” theory) Example Scenario 1 – Firm uses 1000 patents from same external patent owner Scenario 2 – Firm uses 1000 patents from 100 different owners Implications? Expropriation risks are higher for firms with asset specificity Ex-ante contractual solutions more costly / less feasible for firms that draw on pools of external technologies Don't Fence Me In

Hypotheses H1 – The more fragmented the external technology markets, the more aggressively firms will patent (beyond what is otherwise predicted). H2 – The effect of fragmented external rights on incentives to patent will be more pronounced among capital-intensive firms (all else equal). H3A – The effect of fragmented external rights on incentives to patent will be stronger following the “pro-patent” shift in the US legal environment (all else equal). H3B – The interaction effect between fragmented rights and capital-intensity will be greater in magnitude following the “pro-patent” shift in the US legal environment (all else equal). H1 – If fragmented rights to patents render ex-ante contracting less feasible, one should expect firms that draw widely distributed technologies to patent more aggressively. H2 – When external technology market is fragmented and cost associated with potential held-ups are large, firms will invest heavily to forgo the potential costs and delays in negotiating with patent owners. H3A – “Pro-patent” shift in US legal environment will act mediate Don't Fence Me In

Construct Existing literature lacks reliable measure for firm’s technological use, hence suggested new measure Fragmentation Index NBCITES (Number of backward citations) is the total number of citations listed in patents assigned to each firm (on an annual basis). j refers to each unique entity that is cited by patents issued to firm i in a given year. F Hat - To correct for statistical bias towards firms with few patents as suggested by Hall(2002), normalized index Don't Fence Me In

Methodology Population – US firms having business in semiconductor and related devices (SIC3674) Sample – 110 publicly traded US firms and are included in Compustat Final sample – 72 firms Estimation sample – 67 firms, 1980 - 1994 Period – 1975 to 1996 Estimation Sample – To test H31 and H3b, sample is divided into years before and after the strengthened US enforcement regime. Although new appellate court was established in 1982, until 1985-86 when Texas instrument and Polaroid won large patent suit, the impact was not felt in industry. Further as suggested by literature, this paper has considered the year 1985 as the benchmark to split the period into pre and post “propatent” regime Don't Fence Me In

Model and Variables Expected number of patents applied for during a year CV Size of firm R&D spending Capital-intensity Dummy variable for Texas Instruments (an outlier) Annual time dummies DV – # of successful patent applications made by firm in a given year IV Firm-specific annual Fragmentation Index Interaction – Fragmentation Index and Capital-intensity DV – Propensity to patent Don't Fence Me In

“Qualified” support to H1 Results(I) Robustness: Fragmented index is simply an indirect proxy Omitted variable bias Some firms “better” at assimilating external technologies  Internal decisions of firms to acquire patents is affected by external distribution of patent rights surrounding technologies H2 H1 Fragmented Index Omitted variable bias: Firms “better” at assimilating external tech Qualified support to H1  suggests relation bet fragmented rights and incentive to patent is more complex “Qualified” support to H1 Don't Fence Me In

Results(II) Supports H2 the total slope coefficient for capital-intensity in Column 3 switches signs within the sample and is positive only for above-mean values of fragmentation (at values ≥075). Capital-intensive firms do not patent more intensively than other firms in the sample (again, controlling for other factors) unless they build on fragmented pools of outside technologies. Don't Fence Me In

Results(III) Column 1a and 2a  semiconductor firms’ decision to patent became less responsive to changes in their R&D investments during the era of strong patent rights; and capital-intensity emerges as a strong, significant predictor of these firms’ patenting behavior only under the “propatent” regime (supportive of the hypothesis that capital-intensive firms responded strategically to the legal reforms by amassing portfolios of patents). Don't Fence Me In

Conclusion Contribution Deepens understanding on broader, strategic motives for patenting Isolates dimensions of a firm’s contracting problem in markets for technology Shows how firm-specific and environmental factors interact with shape incentives to patent New empirical evidence on determinants of patenting in semiconductors Explores trade-off among mechanisms and identify conditions under which an aggressive patent acquisition strategy represents alternative organizational response. Suggests role of complimentary assets, apart from patents, that a firm can earn rents from (inspiration to - Arora & Ceccagnoli, 2006) Don't Fence Me In