Journal of International Management 27 (2021) 100820 1075-4253/© 2020 Elsevier Inc. All rights reserved. Innovation strategy of latecomer firms under tight appropriability regimes: The Indian pharmaceuticals industry Sangeeta Ray a , Pradeep Kanta Ray b, * a Discipline of International Business, University of Sydney School of Business, University of Sydney, Sydney, New South Wales 2006, Australia b UNSW Business School, University of New South Wales, Sydney 2052, New South Wales, Australia A R T I C L E INFO Keywords: Institutional context TRIPS Exploratory innovation Latecomer firms India ABSTRACT As emerging economies joined the World Trade Organisation (WTO) and became signatories to the TRIPs (Trade Related Intellectual Property Rights) Agreement, their enterprises face a new institutional environment governed by a tight appropriability regime. A tight appropriability regime demands that latecomer firms (LFs) from emerging economies transform from being technology followers to knowledge producers and innovators. We test if this hypothesis is valid for developing countries which have a different set of initial endowments and institutions. The central research question guiding this study is how LFs are adapting their innovation practices in response to an institutional shift from a weak to a tight intellectual property regime. We harbour a few hypotheses that predict how a shift from a weak to a tight appropriability regime is likely to affect innovation practices of LFs. Using econometric analysis on a panel data from 480 Indian firms from 1994 to 2012, the innovation practices of LFs are compared over two time periods – corresponding to a weak and tight appropriability regime. Discriminant Analysis and LOGIT tests suggest that institutional transition increases the propensity of LFs to engage in exploratory innovation and develop their human capital and codified knowledge base. But what is interesting and contrary to what was predicted, LFs appear to be less likely to forge formal and informal linkages with foreign firms under the tight IPR regime as compared with a weak IPR regime. 1. Introduction Institutional context can play a key role in shaping strategic choices and practices of actors within an innovation system. Until the late 1980s, most developing countries, including today’s emerging economies, deliberately relaxed intellectual property rights (IPRs) to create a weak appropriability environment in which product patents were not recognized or protected by law (Mytelka, 2006). Technologies and knowledge created by an innovating firm were imitated by rival firms. Emerging economy copycats imitated a pioneer’s products, and adapted existing technologies, designs and functions (Awate et al., 2018; Luo et al., 2011). Such an envi- ronment encouraged imitative learning in latecomer firms through reverse engineering of products, many of which were still under patent protection. Overall, a weak appropriability regime helped in diffusion of useful generic technologies to enable development of process innovation skills for adaptive or creative imitation (Kim, 1997). The emergence of new trade agreements under the World Trade Organisation (WTO) under Trade Related Intellectual Property Rights System (TRIPS) created a new institutional environment that is governed by a tight appropriability regime (Dhar and Joseph, * Corresponding author. E-mail addresses: sangeeta.ray@sydney.edu.au (S. Ray), pray@unsw.edu.au (P.K. Ray). Contents lists available at ScienceDirect Journal of International Management journal homepage: www.elsevier.com/locate/intman https://doi.org/10.1016/j.intman.2020.100820 Received 6 May 2020; Received in revised form 10 November 2020; Accepted 26 November 2020