To commercialize inside or outside of the firm: Behavioral considerations in patent exploitation by family firms

Abstract

Research Summary: This article examines the relationship between family ownership and patent use strategy using primary data from a patent survey, as well as patent and firm-level data from secondary sources. The findings reveal that family firms are less likely than non-family firms to license their patents and more likely to internally commercialize them. We show that the decision of family firms to license less does not depend on lower patent quality or inefficient patent use. Instead, it arises from their preference for patent uses that allow them to exert greater control over the value they can derive from their innovations. We also show that family firms commercialize more patents because they leverage their managerial discretion to explore and seize emerging internal patent commercialization opportunities. Managerial Summary: Whether the desire of families in family firms to maintain control over the company and strategic resources negatively impacts their economic performance has important governance implications. Within the context of patent commercialization, in line with this desire for control, our study highlights the preference of family firms to prioritize internal commercialization over licensing. To offset their underlicensing tendency, family firms internally commercialize more patents by being nimble to identify and capitalize on emerging commercialization opportunities. This enables them to align their control ambitions with patent commercialization efficiency, akin to nonfamily firms.