Fire and ice: The incompatible impact of industry-wide domestic patents and international standards on firm internationalization

Abstract

This study contributes to firm internationalization theory by identifying domestic patents and international standards as industry-level attributes that differently affect the ability of firms to internationalize. Firms operating in industries with extensive patenting enhance internationalization via technology-based competitive advantages that allow overcoming liabilities of foreignness (LOFs). Furthermore, firms operating in industries with extensive standardization enhance internationalization via the reduction of LOFs that manifest in transaction costs and information asymmetries. Yet operating in industries replete with both domestic patents and international standards raises challenges for internationalizing firms due to the incompatibility of these attributes with respect to LOFs, thus domestic patents and international standards yield a negative joint effect on firm internationalization. We test these priors by employing panel data on the internationalization of up to 4248 publicly-traded U.S. firms in the manufacturing sector over the 1997–2019 period.