Institutional Regime Shift in Intellectual Property Rights and Innovation Strategies of Firms in China

Kenneth Guang-Lih Huang (), Xuesong Geng () and Heli Wang ()
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Kenneth Guang-Lih Huang: Division of Engineering and Technology Management and Department of Strategy and Policy, NUS Business School, National University of Singapore, Singapore 117575
Xuesong Geng: Lee Kong Chian School of Business, Singapore Management University, Singapore 178899
Heli Wang: Lee Kong Chian School of Business, Singapore Management University, Singapore 178899

Organization Science, 2017, vol. 28, issue 2, 355-377

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 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (45)

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