Status Ambiguity and Conflict in the Market

My main theoretical contention is that status hierarchiesprovide a source of guidance to firms for resolving disputes. Astatus hierarchy implies a system of deference rules among firms.When disputes arise, deference rules can provide a basis for sharedexpectations and protocols of conduct about how technicalambiguities should be resolved. In many contexts, technical meritis difficult to assess. However, deference rules can operate associal conventions to which firms default, helping to alignpotentially incompatible expectations.Within this general framework, my dissertation examines howcompetitors in the semiconductor industry manage uncertain andfrequently overlapping patent rights. In practice, patent rightsare highly imperfect legal instruments when it comes to demarcatingeach firm's contributions to innovation in the industry. Patentdisputes arise because of the ambiguity this creates about how muchof the collective market returns to innovation each firm isentitled to receive. Despite the prolific patenting and propensityfor disputes, the industry has remarkably not ground to a halt fromrunaway litigation. Litigation events, while significant, arerare.I suggest that this degree of order is, at least partly,attributable to status processes. Status can operate as astabilizing force in the market, helping to generate orderlycompetition in the face of disputes. To examine whether this is thecase in the semiconductor industry, I theorize that disputes areless easily resolved when the parties involved face greater statusambiguity, i.e. are less clearly differentiated from one another instatus. Under status ambiguity, deference rules lose the rule-like,universal quality that makes them persuasive in resolving disputes.This has two consequences. First, firms facing low status ambiguityare less likely to be involved in patent litigation than are firmsfacing high status ambiguity. Patent litigation events representfailures to resolve patent disputes out of court. Second, firmsfacing low status ambiguity increase their product line sizes morethan do firms facing high status ambiguity. The threat ofdifficult-to-resolve patent disputes represents a cost that candeter firms from bringing products to market.