What factors affect the emergence of patent thickets: the evidence from China

A patent thicket is an overlapping web of patent rights that makes the firms willing to commercialise new technologies have to obtain licenses from multiple holders. Patent thickets will increase transaction costs due to complements and hold-up problems, consequently impeding technological innovation. However, what factors may affect the formation of the patent thickets is still an open question. This paper explores the causal factors of patent thickets based on 69 telecommunication equipment firms in China between 2008 and 2019. By adopting the random-effects panel Tobit model, the paper finds that at least three factors facilitate the formation of patent thickets: patent portfolio races, technological complexity, and technological cumulativeness. Notably, the open patent strategy and invention strategy negatively moderate technological cumulativeness and patent thickets. The paper empirically studies what factors affect the formation of patent thickets and theoretically explains the patent thickets’ formation mechanisms at the firm level. Companies’ managers should look objectively at the patent thickets in a complex technical field and may carry out the open patent strategy and invention strategy to navigate patent thickets.