The effects of strengthening patent rights on firms engaged in cumulative innovation: Insights from the semiconductor industry

During the 1980s, changes in the U.S. legal environment ushered in an era characterized by strong patent rights. This paper examines the effects of this “pro-patent” shift on firms in the semiconductor industry. By conducting interviews with industry representatives and analyzing the patenting behavior of 95 U.S. semiconductor firms during 1979–1995, we find that the strengthening of U.S. patent rights spawned “patent portfolio races” among capital-intensive firms, but also may have facilitated entry by specialized design firms during this period. The results highlight the multifaceted effects of strengthening patent rights on firms within one important cumulative technological setting.