How does intellectual property protection matter? Infringement disputes and corporate innovation investment persistence

Abstract

This study explores how corporate innovation investment persistence is when confronted with intellectual property (IP) infringement disputes and the possible role of the external institutional environment (changes in regional IP protection). We document that when a firm is confronted with IP disputes, its innovation investment persistence produces ‘reversal’ changes regarding the infringed firm and the infringer. The innovation investment persistence of the infringed firm is significantly impaired. By contrast, the persistence of the infringer is considerably enhanced. However, with the increasing IP protection in the region, the degree of decline in the infringed’s investment persistence can be significantly positively mitigated, while that of the infringer is significantly negatively adjusted. Our conclusion provides insights into learning enterprises’ innovation decisions.