Economic nationalism and the home court advantage

Economic nationalism refers to government actions that enhance national interest by protecting and aiding domestic firms at the expense of foreign ones. While prior research has highlighted discriminatory laws and government policies, we contend that economic nationalism may manifest as policies that are non-discriminatory but are nonetheless unequally and differently enforced among domestic and foreign firms by actors entrusted to implement them. We explore this subtler mechanism of economic nationalism in the context of judicial rulings in property rights disputes. We expect the legal system, through its interpretation and enforcement of policies and laws, to create a disadvantage for foreign firms. In a sample of 73,756 intellectual property lawsuits in the United States between 1963 and 2016, we find foreign patent holders (compared to other domestic firms) are 18% less likely to successfully defend their patents in lawsuits against domestic firms. Similarly, domestic patent holders are 19% more likely to win against foreign (compared to domestic) challengers. Our results are robust to controlling for firm and patent characteristics and appear unlikely to be driven by differences in legal capabilities. Thus, the legal system appears to be another source of economic nationalism, giving domestic firms the home court advantage.