Legal Distance, Cognitive Distance, and Conflict Resolution in International Business Intellectual Property Disputes

Due to the rising importance of intellectual property (IP) and increasing incidence of IP violations in today's global economy, this manuscript examines how legal and cognitive distances between MNEs engaged in an international IP dispute affect conflict resolution strategy choice. Even though such conflicts require some form of resolution, to date no consensus has developed with regard to what explains conflict resolution strategy choice in international IP disputes. We integrate IP, conflict management, and institutional theory literatures in testing our hypotheses on a dataset of 243 dyads consisting of 486 MNEs from 28 different countries engaged in international IP disputes. Surprisingly, we find that legal distance is positively associated with the likelihood of using negotiation (as opposed to litigation) as a conflict resolution strategy. However, cognitive distance increases reliance on litigation and at the same time weakens the effect of legal distance. This finding suggests that inherently tacit differences between home country origins may impede reaching a negotiated agreement, even though MNEs are able to bridge more formalized, codifiable, legal differences. Implications and future research directions are discussed.