Ross School of Business, U. of Michigan, United States
This study examines the relationship between the political ideology of evaluators in legal environments and the strategies employed by foreign firms trying to gain legal advantage. We propose that, compared with domestic firms, foreign firms will act upon an anticipated disadvantage when facing ideologically conservative legal evaluators (judges and jurors). We examine two specific strategies by which foreign firms mitigate the associated disadvantage. First, foreign firms with agency in selecting venues will try to avoid conservative evaluators. Second, when foreign firms require the goodwill of conservative evaluators, these firms conceal their foreign identity by changing the ethnic composition of their representatives. Using data on patent infringement litigation in the U.S. from 2000 to 2016, we find that Asian firms try to avoid conservative courts in litigation or, when litigating in conservative courts, hire fewer Asian lawyers to represent them. We discuss the implications of these findings for research on non-market strategies, political ideologies, labor markets, and the liability of foreignness.
