Patenting choices for valuable subsidiary inventions created in an uncertain and fast changing environment

Date10 December 2018
Published date10 December 2018
AuthorFeng Zhang,Guohua Jiang
Patenting choices for valuable subsidiary
inventions created in an uncertain and
fast changing environment
Feng Zhang and Guohua Jiang
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
Design/methodology/approach The data used in this study arepatents granted to the world largest
firms by the USPTO for inventionsattributable to their subsidiaries in China between 1996 and 2005.In
addition, thepatent 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 categorieson Chinese patent
applicationand international priority.
Findings The findingssuggest that firms have priorityto seek internationalpatent protection, insteadof
host countryprotection, for valuablesubsidiary inventions in theirbackground and marginal technological
fields. In addition, a firm may seek hostcountry legal protection simultaneously for inventions built upon
knowledgefrom technologicallydistant fields.
Research limitations/implications As we are more interestedin protecting technological knowledge,
the protectionof other types of knowledge, such as organizationalknowledge, deserves further research
attentions.Moreover, future research may expandcurrent study by including small and mediumfirms, as
well as firms in otherdeveloping 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
Feng Zhang is based at
Pennsylvania State
University Abington,
Abington, Pennsylvania,
USA. Guohua Jiang is
based at the West Chester
University of Pennsylvania
College of Business and
Public Management, West
Chester, Pennsylvania,
Received 4 September 2017
Revised 6 March 2018
Accepted 1 July 2018
DOI 10.1108/JABS-09-2017-0143 VOL. 12 NO. 4 2018, pp. 441-454, ©Emerald Publishing Limited, ISSN 1558-7894 jJOURNAL OF ASIA BUSINESS STUDIES jPAGE 441

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