The Complex Role of Patents in Creating Technological Competencies: A Cross-National Study of Intellectual Property Right Strategies in the Synthetic Dye Industry, 1857-1914

The dramatic increase of firm patenting in the U.S. during the last two decades may give the impression that the acquisition of patents is becoming increasingly important for protecting and leveraging technological competencies. A historical perspective on how firms acquire technological competences and leverage them in different markets reveals, however, that it is far from obvious that the possession of patents will lead to long-term competitive success. German and Swiss firms in the early years of the synthetic dye industry created superior technological competencies than their British and French counterparts precisely because they were initially not able to obtain patent monopolies in their home markets. When Germany later was about to pass a patent law and dye firms feared negative consequences of patent monopolies for their industry, they collectively organized themselves to influence patent legislation so that it would create a sufficient amount of competition within Germany and force firms to maintain better organizational capabilities than their foreign rivals. Analyzing the history of the synthetic dye industry from 1857-1914 in a variety of countries, the purpose of this paper is to contribute to a more nuanced understanding of the role of patents in the development of firm capabilities. It highlights that firms in high-tech industries need to develop capabilities in executing multifaceted patent strategies.