To License or Commercialize: Behavioral Considerations in Patent Exploitation by Family Firms

This paper examines the relationship between family ownership and patent use strategy using primary data from a patent survey, and patent and firm-level data from secondary sources. We find that family firms are less likely than non-family firms to license and more than non-family firms to commercialize their patents. This decision is not driven by family firms’ lower patent quality or inefficient use of patents. Instead, it is due to family firms’ strong preference for patent uses that give them more control over values they can appropriate from their patents. To this end, family firms actively search for opportunities to use their patents internally by deviating from intended patent uses in favor of commercialization and spending more research time to commercialize even unanticipated (serendipitous) patents more than non-family firms. This idiosyncratic preference in patent exploitation may positively contribute to the scaling up of family firms but potentially hinders the development of Market for Technology.