The timing dilemma: understanding the determinants of innovative startups’ patent collateralization for loans

The effects of knowledge base characteristics on patent pledge financing: the moderating effects of technological munificence and dynamism

“…Although there are three types of patents in China – invention, utility model and design – invention patents are more likely to be selected as collateral because of their technological importance (Li, 2012; Yang et al , 2023). Accordingly, first, we restrict the sample to invention patents in this study (Yang et al , 2021; Yang et al , 2023). Secondly, we exclude the samples with missing fundamental variables.…”

“…Secondly, we exclude the samples with missing fundamental variables. Thirdly, we only retain the first-time pledge of each patent because the decision-making mechanisms of follow-up transactions are different from first-time pledges (Yang et al , 2023; Zhang et al , 2021). The final unbalanced panel data set includes 1,112,887 observations involving 348,927 invention patents belonging to 74,996 firms.…”

“…Patents, an important intangible asset, can be used as collateral to mitigate information asymmetries, making it easier for resource-constrained firms to access debt financing instead of resorting to equity financing at the cost of the firms’ partial ownership and control (Zhang et al , 2021; Fischer and Ringler, 2014; Boot et al , 1991; Ueda, 2004). With the recent surge in Chinese patenting (Li, 2012; She et al , 2020; Zhang et al , 2023; Chen and Zhang, 2019), many innovative firms in China are facing financial problems (Yang et al , 2023). Therefore, the Chinese Government issued a series of policies to promote the development of patent pledge financing.…”

“…Using data from the United States Patent and Trademark Office, scholars have verified that creditor rights and market liquidity of patents are positively associated with the probability of debt financing for firms (Hochberg et al , 2018; Mann, 2018). Based on data from the China National Intellectual Property Administration (CNIPA), some scholars have also proven that both patent age and firm age have nonlinear relationships with patent pledge financing (Yang et al , 2021; Yang et al , 2023).…”

“…Many scholars have emphasised the significance of the knowledge base during firms’ innovation activities and examined its effects on the development of inventions, new products and financial performance (Katila, 2002; Katila and Chen, 2008; Moorthy and Polley, 2010; Fleming, 2001; Fleming and Sorenson, 2004). However, little attention has been paid to patent pledge financing, a crucial arrangement for alleviating the firms’ financial constraints (Yang et al , 2023). Based on the knowledge-based theory, this study explores the influence of knowledge base on patent pledge financing instead of focusing on its internal impacts.…”