Intellectual property crises induced by incumbent firms and latecomer firms’ catch-up performance: evidence from different sectoral environments

ABSTRACTWhy and how do incumbent firms (IFs) induce crises for latecomer firms? How do latecomer firms (LCFs) manage the crises, and how does crisis management affect LCFs' catch-up? To answer these questions, we look at crises induced by IFs and LCFs' crisis management by drawing on competitive dynamics and crisis management theories. Based on two case studies in the telecommunications sector, we find that IFs induce crises using intellectual property (IP) lawsuits (called IP crises) for hindering LCFs' catch-up. Two LCFs achieved different catch-up performance based on the effectiveness of subsequent IP crisis management. In particular, we also find that the sectoral environments, in terms of technological and demand regimes, can act as a moderator in the relationship between the IP crisis management and the catch-up performance. We propose a more fine-grained view in catch-up studies by suggesting that the constructs 'IFs-induced IP crises' and 'LCFs' IP crisis management".KEYWORDS: Catch-up failurecompetitive dynamicsincumbent firms induced intellectual property criseslatecomer firms' intellectual property crisis managementJEL: O14O32L53 AcknowledgementsThis work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (No. 2020R1F1A1071840).Disclosure statementNo potential conflict of interest was reported by the author(s).Notes1 Throughout, we include extracts from our interviews; Table 1 details the interview subjects, who are identified by number. Some of the evidence we mention lacks citations but comes from the interviews.2 Based on previous patent studies on the sector (Curran and Leker Citation2011; Guo et al. Citation2017, Citation2019; Oh et al. Citation2020; Park and Ji Citation2015; Suh and Jeon Citation2019; Webb et al. Citation2018), we observed that patents related to network equipment and smartphone technology are commonly in the subclasses H04W, H04L, G06F, and H04N IPC and CPC. Specifically, considering the analysis of Curran and Leker (Citation2011) and Webb et al. (Citation2018), we add H04M to smartphone-related patents exclusively for HTC and Apple. Similarly, following Guo et al. (Citation2017, Citation2019), we include only H04B in the patent analysis on Huawei and Cisco. We collected the patent application quantity and backward citations time-series data on four firms from the United States Patent and Trademark Office for our study period, 2000–2016.3 Based on the HTC interviews, we discovered that the ITC investigations cost at least USD 6 million per case, thus HTC paid about USD 60 million for a dozen investigations.