Stay or Relocate? IP Litigation Shocks and Firms’ Cross-Regional Investment

As intellectual property enforcement intensifies across emerging economies, IP litigation has evolved from a narrow legal event into a strategic pressure that extends well beyond courtroom outcomes. This paper investigates whether and how IP litigation shocks alter firms’ cross-regional investment decisions. Using a panel of Chinese A-share listed firms from 2012 to 2024, we find that IP litigation significantly promotes cross-regional investment. This finding survives instrumental variable estimation, alternative variable measurements, propensity score matching, and the exclusion of special samples. Mechanism analysis reveals that litigation compresses slack resources to redirect financial flexibility toward external locations, tightens trade credit to partially restrain expansion, and lengthens managerial time horizons to elevate the decision weight of geographic diversification. The spatial-escape response is more pronounced among state-owned enterprises, firms with lower IP intensity, firms in regions with less developed judicial infrastructure, and firms in concentrated industries. Panel quantile regressions indicate that firms with moderate existing geographic presence are the most responsive. These findings highlight the role of adverse legal shocks as a push-side catalyst for corporate spatial restructuring.