Patenting choices for valuable subsidiary inventions created in an uncertain and fast changing environment
Authors: Zhang Feng , Jiang Guohua 
Published: October 2018

Purpose

Firms increasingly diversify their technological competencies to achieve different strategic objectives. This study aims to explore the impacts of technological knowledge characteristics on patenting choices for inventions created by subsidiaries in an uncertain and fast changing environment.

Design/methodology/approach

The data used in this study are patents granted to the world largest firms by the USPTO for inventions attributable to their subsidiaries in China between 1996 and 2005. In addition, the patent data from State Intellectual Property Office (SIPO) of China are used for the matching in terms of filing patent applications in both USA and China for a same piece of technology. A discrete Logit model is used to examine the effects of technological distance and categories on Chinese patent application and international priority.

Findings

The findings suggest that firms have priority to seek international patent protection, instead of host country protection, for valuable subsidiary inventions in their background and marginal technological fields. In addition, a firm may seek host country legal protection simultaneously for inventions built upon knowledge from technologically distant fields.

Research limitations/implications

As we are more interested in protecting technological knowledge, the protection of other types of knowledge, such as organizational knowledge, deserves further research attentions. Moreover, future research may expand current study by including small and medium firms, as well as firms in other developing economies.

Practical implications

While the economic and legal environment in China may have evolved since studied period, the results have practical implications for firms in other developing countries that are at an early stage of catching-up or those in a host location featuring a similar uncertain and fast changing environment. In particular, the study suggests that foreign firm managers would have more strategic choices of patenting than local firms in the host country. For strategically important inventions bridging complex knowledge from different technological areas, firms could seek protection in multiple countries simultaneously, including both home country and other major markets. Furthermore, managers could choose whether or not to protect a particular category of technologies in host country depending on value of the technology to the firm and the IPR protection of host country. Finally, the approach of looking at knowledge-level characteristics, which can be easily measured through readily available intra-firm information, provides managers with a practical and useful tool to make these strategic decisions.

Originality/value

This study represents an effort to extend the understanding on how foreign MNCs could generate and appropriate valuable technologies in an uncertain and fast-changing environment. In particular, the authors focus on how MNCs could use different international patenting patterns to benefit from subsidiary inventions. Whereas previous literature mainly focuses on country-level and firm-level determinants, this study approaches the topic through the lens of knowledge-level factors. By studying how knowledge characteristics determine firm strategic behaviors, the authors offer additional justifications of the knowledge-based view of the firm. Meanwhile, the findings enrich our understanding of an important component of MNC’s global strategies in managing their technologies through selectively patenting in different locations. Firms pursue diversified technologies for different strategic objectives. As subsidiary inventions become a very important source of firm competitiveness, MNCs have to face the trade-off between higher patenting costs and the appropriability of subsidiary generated knowledge. The findings suggest that it is not necessary for MNCs to protect all subsidiary inventions in host countries.