1. Don’t fence me in: Fragmented markets for technology and the patent acquisition strategies of firms
Ziedonis, Rosemarie H.
Management Science, 50 (6):
Presented by Jiyoon Chung

2. Overview Introduction Theory development and hypotheses
Hold-up in markets for technology
Implications for patent acquisition strategies
Constructing a citations-based measure of fragmented markets for technology
Methodology
Sample selection and data
Model specification and variables
Results
Conclusions
Discussion

3. Introduction
This paper examines the conditions under which an aggressive patent strategy is an alternative mechanism that firms use to avoid being “fenced in” by owners of technologies used in the design and manufacture of their products.
Transaction cost theory, studies of intellectual property (IP), and its exchange
Primary reasons firms patent in complex industries:
Patent blocking
To use in negotiations with owners of outside patents and technologies
To deter patent infringement lawsuits
This article shows that transaction cost approach to interorganizational strategies, in neglecting the issue of joint value, can lead to analyses in which the rational existence of interorganizational strategies may appear irrational from a transaction cost efficiency

4. Theory development and hypotheses
Two dimensions of a firm’s contracting problem
Hold-up in markets for technology
The additional problems posed by multiple, fragmentary patent owners
Internalize transactions
Underinvest in areas where risks of expropriation are high
Important insight from “anti-commons” theory: a firm’s bargaining challenge is affected by the level of dispersion among rights holders

5. Theory development and hypotheses
Implications for patent acquisition strategies
To acquire the owners of patents
To amass larger patent portfolios as a way of improving ex post bargaining position
Hypothesis 1: The more fragmented the external technology markets, the more aggressively firms will patent (beyond what is otherwise predicted).
Hypothesis 2: The effect of fragmented external rights on incentives to patent will be more pronounced among capital-intensive firms (all else equal).
Hypothesis 3A: The effect of fragmented external rights on incentives to patent will be stronger following the “pro-patent” shift in the U.S. legal environment (all else equal).
Hypothesis 3B: The interaction effect between fragmented rights and capital-intensity will be greater in magnitude following the “pro-patent” shift in the U.S. legal environment (all else equal).

6. Constructing a citations-based measure of fragmented markets for technology

7. Methodology
The estimation sample is based on observations during the period, generating 667 observations on 67 firms
Model specification:
Control variables: the size of the firm, R&D spending, capital- intensity, a dummy variable for Texas Instrument (TI), annual time dummies, fragmentation index, and interaction term

8. Results

9. Results

10. Results
Hypothesis 1 and 2 are corroborated

11. Results
Hypothesis 3A and 3B are corroborated

12. Research limitations
Focuses on one mechanism (patenting) in isolation from others
Are the research findings generalizable to other technological or industrial settings?

13. Conclusions
This paper examines how the allocation of property rights among inventive actors shape the patent acquisition strategies of firms
Findings:
Firms acquire patents more aggressively than otherwise predicted when markets for technological inputs are highly fragmented
This effect is more pronounced among firms with large investments in technology-specific assets and under a legal regime of strengthened exclusionary rights for patent owners
Capital-intensive firms do not patent more intensively unless they build on fragmented pools of outside technologies