A change in U.S. patent law in the early 1980s increased the value of patents, particularly for firms in the electronics and semiconductors industry, yet many of the industry's leading firms did not embrace patenting after the change. We show through an in-depth study of International Business Machines (IBM), the world's largest patentee, that the company's practices during much of the 1980s discouraged patenting. IBM adopted pro-patent management practices in 1989 after the installation of a new research and development head and in the face of faltering financial performance. IBM's increased patenting and licensing activities improved its financial bottom lines but curtailed its industry-wide knowledge spillovers. These causes and consequences of pro-patent practices are visible in several other large U.S. corporations. Thus, in the context of the "patent explosion" of the 1980s, we show that intraorganizational forces such as inertia, financial pressures, and new leadership shaped established firms' uptake of pro-patent management practices and their success. Our findings also suggest that pro-patent practices associated with "open innovation" may stem the free flow of knowledge across organizational boundaries.

No abstract

The use of drug price controls is a contentious issue globally. Low- and middle-income countries use direct price controls to improve access to essential drugs. But such price controls have little meaning if they are not designed and implemented well, and the extent to which firms coordinate in these countries to weaken price controls has been largely overlooked. In mid-2013, India adopted partial price-cap regulation for some, but not all, formulations of several essential medicines. Using data on sales and prices of the out-of-patent oral antidiabetic drug Metformin—considered essential by WHO since 1998—and employing the differences-in-differences methodology, we examine the impact of the regulation on curbing prices. We find that firms coordinated to increase the price of the regulated formulation in the period before regulation, which led to a higher ceiling price. We also find, using triple-differences analyses, that the coordination is stronger among larger firms and for time-release formulations. We present anecdotal evidence to suggest that pharmaceutical trade associations facilitated coordination among firms, and we conclude that partial price control of Metformin in India is, at best, a modest improvement over no regulation.

No abstract

In this paper, we examine how the provision of product customization services affects firm survival. Integrating literatures on industry evolution, product-related adapting services, and entry deterrence, we hypothesize that the relationship between product customization—the costly modification of a product to cater to customer needs—and firm survival differs across industries, based on the extent of submarkets. We argue that in industries that feature submarkets more prominently, the positive association between product customization and firm survival is stronger for two conceptually distinct and empirically distinguishable mechanisms: customizing firms enter new submarkets and also deter potential entry. We conclude that offering product customization services has strategic benefits that sometimes outweigh the cost of coordinating with customers.