Reputations for toughness in patent enforcement: implications for knowledge spillovers via inventor mobility

TLDR

Job hopping by engineers and scientists is widely heralded as an important channel for knowledge spillovers within industries, yet little is known about firms’ actions to curb outward knowledge flow through skilled labor markets. This study investigates the efficacy of corporate reputations for toughness in patent enforcement. The study uses unique data on enforcement activity, intra‑industry inventor mobility, and patent citations in the U.S. semiconductor industry to assess how a firm’s litigiousness affects knowledge spillovers. The deterrent effects of patent enforcement are similar in magnitude for firms in California and those elsewhere, and the study reveals strategic actions firms use to prevent rivals from capturing value from their investments in human capital and R&D.

Abstract

Abstract ‘Job hopping’ by engineers and scientists is widely heralded as an important channel for knowledge spillovers within industries. Far less is known, however, about the actions firms take to reduce the outward flow of knowledge through markets for skilled labor. This study investigates the efficacy of a lever that has received little research attention: corporate reputations for toughness in patent enforcement. Drawing on unique data on enforcement activity, intra‐industry inventor mobility, and patent citations in the U.S. semiconductor industry, we find that a firm's litigiousness significantly reduces spillovers otherwise anticipated from departures of employee inventors, particularly when the hiring organizations are entrepreneurial ventures. Surprisingly, the deterrent effects of patent enforcement are similar in magnitude for firms located in California, a state characterized by open norms for knowledge trading, and firms headquartered in other U.S. states. The study sheds new light on the strategic actions firms use to prevent rivals from capturing value from their investments in human capital and research and development. Copyright © 2009 John Wiley & Sons, Ltd.