Managers Protect Intellectual Property Rights in China

¶ … managers protect intellectual property rights in China using de facto strategies" by Keupp, Beckenbauer and Gassmann. It was published in R&D Management in 2009 and the full text is available online at http://www.alexandria.unisg.ch/EXPORT/DL/53574.pdf

The authors begin with the premise that intellectual property rights are not as well-protected in emerging markets as they are in Western countries. In China, the authors note, social norms give the country a view on intellectual property rights that is distinct from the Western view. As a result, firms face significant risk in doing business in China, because they expose their intellectual property to actors who do not have the same respect for IP rights. The Chinese legal system simply does not respect IP rights to the degree that most Western firms would prefer.

Thus, Western firms need to employ creative strategies in order to ensure that their rights are protected. The authors' use of the term de facto reflects that such tactics are outside of the direct rule of law, which would be de jure. China does not have the strong internal legal system to defend the IP laws that are on the books, meaning that neither the primary nor complementary tactics Western managers normally use to protect their IP work in China.

The authors used anecdotal evidence to compile different strategies for protecting IP. The first strategy involves changing plans in such a way that ensures Chinese partners have no access to sensitive IP. This includes moving research facilities to other countries if need be. Another strategy is technological specialization, where Western management "makes imitation impossible by increasing the complexity of the product or the process technology" -- something similar to what mints do in order to prevent currency forgeries. Other companies adopted the strategy of secrecy, by never putting important information in writing. Often, this involves keeping a specific key bit of knowledge secret, without which the product will not function.