Is there a role for patents in the financing of new innovative firms?

Abstract

It is argued by many that one of the benefits of the patent system is that it creates a property right to invention that enables firms to obtain financing for the development of that invention. In this paper, I review the reasons why ownership of knowledge assets might be useful in attracting finance and then survey the empirical evidence on patent ownership and its impact on the ability of firms to obtain further financing at different stages of their development, both starting up and after becoming established. Studies that attempt to separately identify the role of patent rights and the underlying quality of the associated innovation(s) will be emphasized, although these are rather rare.

Companies and UN 2030 Sustainable Development Goal 9 Industry, Innovation and Infrastructure

“…Therefore, granting property rights to these intangibles would seem to ensure the ability of the new company to grow without the threat of immediate imitation. 100 Patents operate as one of the posited benefits of the IP law framework, especially for start-ups where patents acts as a quality signal for potential innovative solutions to problems and convey information to financiers and investors. 101 At first glance, is it difficult to understand how laws that provide monopolistic exclusionary rights on the one hand can promote sustainable arts and sciences that benefit our society on other.…”

The fall of the innovation empire and its possible rise through open science

“…The economics literature is frustratingly in no better position today than it was in the 1950s to answer the question of whether patents increase or decrease overall innovation ( William, 2017 ; Gallini, 2017 ; Sampat and Williams, 2018 ; Hall, 2019 ). Further, there is evidence that, while intellectual property and economic growth are correlated, the direction of causation may be from growth to higher levels of intellectual property protection, mediated by politics, rather than from intellectual property to growth ( Morin and Gold, 2014 ; Gold et al., 2019 ).…”

From discovery to commercialization: accretive intellectual property strategies among small, knowledge-based firms

“…Other studies show that patents are a relatively ineffective signal to obtain finances for nascent firms unless they are accompanied by prototypes (Audretsch et al, 2012) or research alliances as well as an experienced team (Hoenig and Henkel, 2015). Further, nascent firms with patent applications, enjoy similar levels of survival and growth as patenting firms, just as several studies show that firms often survive without any patent applications (Hall, 2019). have no in-house technical capability but patent or obtain exclusive licenses from an inventor in order to profit from patent prosecutions. See Cohen et al, (2019) for a more in-depth discussion.…”

“…Though studies acknowledge the signaling value of patents, especially related to attracting earlystage capital, most scholars have nonetheless remained silent on the role of publishing (Barney, 1991;Harhoff, 2009;Hottenrott et al, 2015). Further, in her review of the empirical patenting literature, Hall (2019) questions, rhetorically, the per se value of patents noting that some firms seemed to perform well with only patent applications (including unsuccessful applications) or even without applications to provide patent protection. In sum, scholars continue to raise the possibility that the value of publishing and patenting may not stem from their guarantee IP rights, but instead from a gain in importance as proxies for the underlying quality of the firm and its developed technology.…”