The use of patents and informal appropriation mechanisms—Differences between sectors and among companies

Against the background of the rise in patent applications during the 1990s, the present article tries to explain how different kinds of firms act to appropriate their investments in innovation activities under the newly evolving conditions. Thereby, not only the patent activities of firms, but also their preferences for different formal and informal appropriation mechanisms are analyzed. Firms are differentiated by several characteristics, e.g. size, sector and internationalization, to answer the question whether special firm characteristics can influence what is the best appropriation option for the firm.For the empirical testing, a large-scale survey of patenting companies in Germany – complemented with information from patent and company databases – is employed. The results show that only a very small percentage (7.4%) of firms in the sample stress the importance of formal appropriation methods while at the same time evaluating informal appropriation methods as being of low importance. Especially internationalized firms, which file significantly more patents than their counterparts, seem to use patents rather for strategic purposes than as a mechanism to protect their inventions from being imitated. Patents could therefore be seen as a basic requirement to enter foreign markets, with a need to defend market positions by strategic patenting.

► Firms are differentiated by their preference for different appropriation mechanisms.
► Few firms in the sample stress the importance of formal appropriation methods alone.
► Research intensive and internationalized firms prefer informal mechanisms.
► Large as well as internationalized firms use patents mostly for strategic purposes.
► Patents are used for market entry, informal mechanisms for appropriation of returns.