Crowding out or Lock-in? Patent thickets and latecomers’ Innovation policies

Hongli Gao, Peijie Wang, Hongyu Yi and Chen Lv

Finance Research Letters, 2025, vol. 76, issue C

Abstract: Despite the widely investigated phenomenon of patent thickets as barriers to innovation due to fragmented ownership of overlapping patent rights, how patent thickets affect latecomers’ innovation policies remains unclear. Based on data from China's listed companies in strategic emerging industries from 2009 to 2019, this study examines the impact of patent thickets on latecomers’ innovation policies and the influencing mechanism. The findings reveal that patent thickets impede latecomers’ exploratory innovation, demonstrating a crowding out effect. Furthermore, patent thickets lock-in exploitative innovations, resulting in greater technological similarity. The crowding out effect of innovations is more pronounced among latecomers with greater market power and lower financial risk, while the lock-in effect is more evident with greater market power but shows no significant variation across different financial risk levels. The findings remain robust against endogeneity and subsample tests for identifying latecomers. Our findings enrich the literature on patent thickets and corporate innovation policies, and offer insights for latecomers to refine innovation policies in a complex industrial environment.

Keywords: Patent thicket; Innovation policy; Lock-in effect; Crowding out effect (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325001990

DOI: 10.1016/j.frl.2025.106935

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