The Supply Side Of IP Management: Understanding Firms' Choices Regarding IP Intermediaries

Studies focusing on the supply side of IP management, particularly on the outsourcing of patent related work, are relatively rare. This paper aims to contribute to the IP literature in two ways. First, a definition of the IP service provider is proposed. Second, I consider three main hypotheses that determine a firm's preference for outsourced IP work. Using data on the outsourcing of patent renewal payments, I found evidence that the choice of IP supplier is affected by: (1) the firm's own IP maintenance capabilities, (2) the firm's IP knowledge utilization, and (3) the IP complexity.

1. Introduction

   In recent years, firms have been turning marginal innovations into patents more frequently than previously and all major patent offices worldwide are facing a "patent explosion". This accumulation of Intellectual Property, and the growth of firms' overall IP portfolios, poses several challenges for the management of IP. Somaya (2012) summarized the literature on strategic patenting and identified opportunities to address important unanswered questions. He pointed out two areas particularly ripe for further research. First, the interplay between firms' internal resources and the capabilities of externally available suppliers. Second, firms' processes related to the hiring and development of expert patent managers and attorneys. In particular, questions related to how firms combine internal and external IP capabilities and the performance implications of these patent related choices, have not been sufficiently studied. Similarly, little theory exists on the analysis of how firms can organize themselves in order to effectively manage their Intellectual Property rights (IPR) in collaboration with external suppliers.

   The literature on patent management has only recently focused on outsourcing. For example, Reitzig and Wagner (2010) highlighted the hidden costs of outsourcing. Mayer et al. (2012) studied the development of various types of human capital and their impacts on outsourcing. Moeen et al. (2013) investigated the factors that influence the concentration of a firm's supply portfolio, and Ayerbe et al. (2014) conducted a case study of Thales, a French group in the defense industry, to explore how IP is organized via outsourcing. All these studies centered on the outsourcing of patent filings, patent prosecution or the organization of IPR with external patent law firms. Within the context of the existing IPR management literature, the present research contributes in two ways. First, it extends the current focus on law firms to introduce another highly specialized IP intermediary, the IP service provider. The work done by Ayerbe et al. (2014) shows that the development of intermediaries such as law firms specialized in managing IPR plays an important role in organizing IP; however, questions of which other types of intermediaries exist, and what roles they play, have remained mainly unanswered to date. Secondly, the research provides a greater understanding of firms' strategies for the sourcing of external IP specialists and provides further insights into how firms organize and manage their IP. Besides the work of Moeen et al. (2013), outsourcing of IP work has never been studied with a focus on how firms manage a set of IP suppliers.

   Firms' boundary decisions go far beyond pure make or buy decisions and include questions concerning firms' choices among different IP suppliers, and regarding the interplay between a firm's internal resources and the externally available capabilities of IP suppliers. I suggest that understanding the determinants of firms' choices concerning the type of IP supplier they select is important for both management research and...