Purchasing sleeping patents to curtail budget padding

This paper provides an explanation for sleeping patents based not on their ability to deter external competitors but rather on their ability to discipline actions of the firmʹs employees. By acquiring a patent upfront, a firm is able to issue a credible threat that it will switch technologies if a managerʹs cost budget for the existing technology is too high. This threat reduces the managerʹs propensity to pad budgets.