We examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation. Recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to R&D. Yet the propensity of semiconductor firms to patent has risen dramatically since the mid-1980s. We explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 U.S. semiconductor firms during 1979-1995. The results suggest that the 1980s strengthening of U.S. patent rights spawned ''patent portfolio races'' among capital-intensive firms, but it also facilitated entry by specialized design firms.

Why and how do resources provide sources of competitive advantage? This study sheds new light on this central question of resource-based theory by allowing a single resource-entrepreneurial-firm patents-to play distinctive roles in different competitive arenas. As rights to exclude others, patents serve a well-known role as legal safeguards in product markets. As quality signals, patents also could improve access and the terms of trade in factor input markets. Based on the financing activities of 370 venture-backed semiconductor startups, we provide new evidence that patents confer dual advantages in strategic factor markets, improved access and terms of trade, above and beyond their added product-market protection. The study has important implications for empirical tests of resource-based theory and the measurement of resource value.

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‘Job hopping’ by engineers and scientists is widely heralded as an important channel for knowledge spillovers within industries. Far less is known, however, about the actions firms take to reduce the outward flow of knowledge through markets for skilled labor. This study investigates the efficacy of a lever that has received little research attention: corporate reputations for toughness in patent enforcement. Drawing on unique data on enforcement activity, intra‐industry inventor mobility, and patent citations in the U.S. semiconductor industry, we find that a firm's litigiousness significantly reduces spillovers otherwise anticipated from departures of employee inventors, particularly when the hiring organizations are entrepreneurial ventures. Surprisingly, the deterrent effects of patent enforcement are similar in magnitude for firms located in California, a state characterized by open norms for knowledge trading, and firms headquartered in other U.S. states. The study sheds new light on the strategic actions firms use to prevent rivals from capturing value from their investments in human capital and research and development. Copyright © 2009 John Wiley & Sons, Ltd.