Abstract
Enforcing a firm’s patents in court is crucial for defending its competitive advantage. CEOs are central for making these strategic decisions but we know little about how their individual incentives shape them. We integrate theory from outcome based CEO compensation designs into models ex-plaining firms’ decisions to become plaintiffs in patent litigation. Based on how compensation shapes time horizons and risk taking of CEOs, we predict that CEO compensation tied to stock increases the firm’s likelihood to enforce patents in court, while bonuses and stock options reduce it. We test and support these hypotheses for 2,685 US firms with 4,733 different CEOs and 3,138 patent litigation cases between 1997 and 2015. These results have implications for theory and practice in assessing risks for patent litigation.
Original language | English |
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Publication date | 2021 |
Number of pages | 33 |
Publication status | Published - 2021 |
Event | DRUID21 Conference - Copenhagen Business School, Frederiksberg, Denmark Duration: 18 Oct 2021 → 20 Oct 2021 Conference number: 42 https://conference.druid.dk/Druid/?confId=62 |
Conference
Conference | DRUID21 Conference |
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Number | 42 |
Location | Copenhagen Business School |
Country/Territory | Denmark |
City | Frederiksberg |
Period | 18/10/2021 → 20/10/2021 |
Internet address |
Keywords
- Patent enforcement
- Patent litigation
- Compensation
- Stock options