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JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. . Wiley and RAND Corporation are collaborating with JSTOR to digitize, preserve and extend access to The RAND Journal of Economics. This article examines the impact of patent scope on firm value. I develop a proxy for patent scope based on the International Patent Classification scheme. Using a sample of 535 financing rounds at 173 privately held venture-backed biotechnology firms, I show that the breadth of patent protection significantly affects valuations. A one standard deviation increase in average patent scope is associated with a 21% increase in the firm's value. Broad patents are more valuable when substitutes in the same product class are plentiful, a finding consistent with theoretical suggestions. * Harvard University. I wish to acknowledge comments on earlier versions of this article

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All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Venture capital is associated with some of the most high-growth and influential firms in the world. Academics and practitioners have effectively articulated the strengths of the venture model. At the same time, venture capital financing also has real limitations in its ability to advance substantial technological change. Three issues are particularly concerning to us: 1) the very narrow band of technological innovations that fit the requirements of institutional venture capital investors; 2) the relatively small number of venture capital investors who hold and shape the direction of a substantial fraction of capital that is deployed into financing radical technological change; and 3) the relaxation in recent years of the intense emphasis on corporate governance by venture capital firms. While our ability to assess the social welfare impact of venture capital remains nascent, we hope that this article will stimulate discussion of and research into these questions.