Patently Wrong? Firm Strategy and the Decision to Disband Technological Assets

Considerable research in strategy and innovation has been devoted to examining when and how firms accumulate resources. Yet, little empirical work has focused on when firms disband resources and how this decision to disband resources is affected by firm strategy. This oversight is surprising since theoretical work has highlighted the importance of knowing which assets to grow and which assets to trim. This paper shows that firms’ decisions to disband assets are significantly influenced by earlier strategic choices, and the effects are distributed non-uniformly across firms in the industry. These results suggest that empirical research that ignores disbanded assets, and firms’ reasons for disbanding those assets, can lead to biased measurements and conclusions on the value of pursuing particular strategies. To test our hypotheses, we examine how the R&D strategy that a pharmaceutical firm chooses —exploratory versus exploitative—influences the likelihood that the firm disband their patents: specifically, not to renew the patent and allow the intellectual property right to expire before the end of the patent term.