Defending knowledge abroad

Research Summary This article analyzes how innovation country‐of‐origin impacts the decisions of multinational corporations (MNCs) to defend their patents against infringement in foreign countries. We argue that MNCs have stronger incentives to defend their locally generated innovations (in foreign countries) than their home‐ or third‐country generated innovations (that have been transferred to foreign countries) because of the higher risk for knowledge spillovers for locally generated innovations. We also explore whether a higher level of multimarket overlap in knowledge activities with industry rivals increases MNC decisions to defend their best innovations. We examine data on infringement cases brought by foreign firms operating in the United States and find results consistent with our expectations. Additionally, when split by patents' country‐of‐origin, our findings reveal several interesting differences. Managerial Summary This article examines how several characteristics of firm innovations influence knowledge spillover risks and the decisions of MNCs to defend their patents against infringement in foreign countries. We argue that locally generated patents and those patents that are more important (in terms of value and usage) or more exposed to rivals are more likely to be defended against infringement in foreign countries. Using data on firms in high tech industries and their patent infringement cases, we show support for our arguments while also revealing several interesting differences across the litigation decisions of MNCs when considering the patents' country‐of‐orign.