The Effects of Patent Attributes and Patent Litigation on Control Rights, Alliance Formation and Technological Innovation

Abstract

My dissertation consisting of three essays focuses on the role of technological innovations in value distribution within R&D alliance, and the impact of patent litigation on R&D alliance formation and technological innovation. Essays one and two are intended to extend signaling theory with transaction cost economics (TCE) and social embeddedness perspective. Essays two and three investigate the consequences of patent litigation on R&D alliance formation and technological search, respectively. Essay one investigates the empirical relationships between patent attributes and allocation of control rights, and the relationships between patent attributes and up-front payment in R&D alliance contracts. Patent attributes of focal innovations signal varying dimensions of patent quality. With a sample of R&D alliance contracts between biotechnology and pharmaceutical firms, I find that patent novelty decreases the number of control rights won by biotech firms and that self-citation reduces the amount of upfront payment paid to biotech firms. Essay two examines the effect of firms being litigious about patent enforcement on subsequent R&D alliance formation. Empirical results show that being litigious about patent enforcement increases subsequent R&D alliances and that repeat ties of litigious firms reduce the positive effect of being litigious on R&D alliance formation. Essay two extends signaling theory by highlighting the understudied role of repeat signal to unintended signal receivers. Essay three examines the effects of patent litigation on technological exploration and exploitation of litigious firms. With a sample of public firms in biotechnology and pharmaceutical industry, empirical result suggests that repeat patent litigation is disruptive to exploitative and explorative innovations. This study makes a small step in investigating the unintended consequences of profiting from innovations by repeatedly resorting to patent litigation.