Patent trolls and startup employment

Ian Appel, Joan Farre-Mensa and Elena Simintzi

Journal of Financial Economics, 2019, vol. 133, issue 3, 708-725

Abstract: We analyze how frivolous patent infringement claims made by nonpracticing entities (NPEs, or “patent trolls”) affect startups’ ability to grow and create jobs, innovate, and raise capital. Our identification strategy exploits the staggered adoption of anti-troll laws in 32 US states. The laws lead to a 4.4% increase in employment at high-tech startups—an increase driven by IT firms, a frequent target of NPEs. Increased access to financing, both venture capital and patent-backed lending, is a key channel driving our findings. Measures aimed at curbing the threat posed by NPEs can thus help reduce the real and financing frictions faced by startups.

Keywords: Employment; Startups; Patent trolls; NPEs; Venture capital (search for similar items in EconPapers)
JEL-codes: E24 G24 L26 O34 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:133:y:2019:i:3:p:708-725

DOI: 10.1016/j.jfineco.2019.01.003

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