Publication Type

Journal Article

Publication Date

3-2017

Abstract

This study develops a novel conceptual framework to understand the differential impact of formal institutional regime shift in intellectual property rights on the innovation and patenting strategies of Chinese and Western firms operating in China. We argue that to the extent that Chinese firms have been deeply embedded in China’s informal institutions, they are less responsive to formal institutional changes than Western firms operating in China. Using the major China patent law reform of 2001 as an exogenous event, we find results consistent with our key arguments: With the strengthening of the previously weak (utility model) patent protection, Chinese firms are less likely to apply for such patents to safeguard their innovations than Western firms. However, this difference becomes less pronounced in regions with higher quality intellectual property rights and legal institutions that foster research and development and innovation, and when Western firms gain longer operational experience in China. This study advances our understanding of the intricate interaction between formal and informal institutions and specifically how “stickiness” may arise in their substitutive relationship because of the embeddedness of firms in informal institutional environments. It also provides important implications for policy and innovation strategies for policy makers and firms in emerging economies.

Keywords

intellectual property rights, innovation strategy, institutional change, emerging economy, China

Discipline

Asian Studies | International Business | Technology and Innovation

Research Areas

Strategy and Organisation

Publication

Organization Science

Volume

28

Issue

2

First Page

355

Last Page

377

ISSN

1047-7039

Identifier

10.1287/orsc.2017.1117

Publisher

INFORMS (Institute for Operations Research and Management Sciences)

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

https://doi.org/10.1287/orsc.2017.1117

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