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In developing new technologies, firms often weigh the balance between internal development and external technology acquisition. This decision is influenced by the transaction costs associated with intellectual property rights, especially when choosing between inventing (make) or acquiring (buy) technological resources. In this study, we investigate a specific source of transaction cost, the litigation risk posed by patent assertion entities (PAEs), and examine how firms pivot their innovation strategies in response to a reduction in PAE litigation risks. Leveraging the enactment of America Invents Act (AIA) that restricted patent trolling activities, we found that lowered PAE litigation risks prompt firms to favor technology acquisitions over in-house inventions, reduce inventions in exploitative areas, and enhance acquisitions in explorative areas. Further, these effects are more pronounced in firms with high-level …