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Racing to the bottom: the impact of technology and patent races on product quality (with Aldona Kapačinskaitė and Keyvan Vakili). Reject and Resubmit, Strategic Management Journal.
Racing to the bottom: the impact of technology and patent races on product quality (with Aldona Kapačinskaitė and Keyvan Vakili). Reject and Resubmit, Strategic Management Journal.
Technology and patent races are widely viewed as mechanisms that spur competition, increase R&D investment, and facilitate follow-on innovation. Yet, little is known about their implications for product quality. We theorize that stronger incentives to accelerate invention and patenting can compromise product quality by encouraging firms to prioritize speed over thorough development. Using data linking patents to the products that embody them, we show that greater pressure to “rush to the patent office” leads to patents associated with lower-quality products. Exploiting the U.S. transition from a first-to-invent to a first-to-file patent system under the America Invents Act as an exogenous shock to filing incentives, we find that medical device firms experienced a significant increase in product recalls. By uncovering a trade-off between speed to patent and product quality, this study broadens the literature on technology races and intellectual property rights, highlighting an important downstream cost of accelerated innovation.
Technology and patent races are widely viewed as mechanisms that spur competition, increase R&D investment, and facilitate follow-on innovation. Yet, little is known about their implications for product quality. We theorize that stronger incentives to accelerate invention and patenting can compromise product quality by encouraging firms to prioritize speed over thorough development. Using data linking patents to the products that embody them, we show that greater pressure to “rush to the patent office” leads to patents associated with lower-quality products. Exploiting the U.S. transition from a first-to-invent to a first-to-file patent system under the America Invents Act as an exogenous shock to filing incentives, we find that medical device firms experienced a significant increase in product recalls. By uncovering a trade-off between speed to patent and product quality, this study broadens the literature on technology races and intellectual property rights, highlighting an important downstream cost of accelerated innovation.
Markets for Trade Secrets (with Aldona Kapačinskaitė and Colleen Cunningham). Under Review, Management Science.
Markets for Trade Secrets (with Aldona Kapačinskaitė and Colleen Cunningham). Under Review, Management Science.
Licensing trade secrets risks losing them. Yet, to profit from invention, firms may engage in such deals, especially as trade secrets are commonly used to protect intellectual property (IP). In this paper, we document and investigate the mechanisms which may facilitate trade secret licenses. Using the roll-out of the Uniform Trade Secrets Act across the US, we investigate how stronger trade secret protection affects the likelihood of trade secret deals compared to patent-only licensing deals. We use data on 2,422 patent licenses with and without trade secrets for a sample of 649 licensing firms. Around 11% of our sample include trade secrets. Following the passage of stronger UTSA protections, complementary trade secret licensing is more likely. We find evidence that knowledge leakage risk matters: stronger legal trade secret protection enables transactions that do not require additional registered IP protection, are not exclusive, and are more spread out geographically. The results broaden our understanding of the frictions, and solutions, involved in trading non-patent IP.
Licensing trade secrets risks losing them. Yet, to profit from invention, firms may engage in such deals, especially as trade secrets are commonly used to protect intellectual property (IP). In this paper, we document and investigate the mechanisms which may facilitate trade secret licenses. Using the roll-out of the Uniform Trade Secrets Act across the US, we investigate how stronger trade secret protection affects the likelihood of trade secret deals compared to patent-only licensing deals. We use data on 2,422 patent licenses with and without trade secrets for a sample of 649 licensing firms. Around 11% of our sample include trade secrets. Following the passage of stronger UTSA protections, complementary trade secret licensing is more likely. We find evidence that knowledge leakage risk matters: stronger legal trade secret protection enables transactions that do not require additional registered IP protection, are not exclusive, and are more spread out geographically. The results broaden our understanding of the frictions, and solutions, involved in trading non-patent IP.
Behavioral biases in knowledge acquisition (with Deepak Jena, Siddhartha Vivekananda and Rajat Khanna)
Behavioral biases in knowledge acquisition (with Deepak Jena, Siddhartha Vivekananda and Rajat Khanna)
Innovations are a salient source of competitive advantage for firms, and they often acquire salient knowledge through external sources in the form of acquisitions. A crucial assumption is that firms often use the knowledge that is acquired, however, growing literature suggests that is not the case. We expand this literature by looking at how behavioral biases in the form of social and historical aspirations impact the use of knowledge post acquisitions. Further, we investigate the moderating effect of CEO overconfidence between aspiration levels and knowledge use. Our results suggest that negative performance feedback against social aspirations increases the bias towards external knowledge and CEO overconfidence attenuates this relationship by downplaying the importance of negative feedback. Poor performance against historical aspirations does not have the same effect suggesting different attention mechanisms for social and historical aspirations.
Innovations are a salient source of competitive advantage for firms, and they often acquire salient knowledge through external sources in the form of acquisitions. A crucial assumption is that firms often use the knowledge that is acquired, however, growing literature suggests that is not the case. We expand this literature by looking at how behavioral biases in the form of social and historical aspirations impact the use of knowledge post acquisitions. Further, we investigate the moderating effect of CEO overconfidence between aspiration levels and knowledge use. Our results suggest that negative performance feedback against social aspirations increases the bias towards external knowledge and CEO overconfidence attenuates this relationship by downplaying the importance of negative feedback. Poor performance against historical aspirations does not have the same effect suggesting different attention mechanisms for social and historical aspirations.
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