Does patenting always help new firm survival? Understanding heterogeneity among exit routes

Masatoshi Kato, Koichiro Onishi and Yuji Honjo
Additional contact information
Yuji Honjo: Chuo University

Small Business Economics, 2022, vol. 59, issue 2, No 3, 449-475

Abstract: Abstract While patents are a valuable resource ensuring the competitive advantage of firms, there is limited evidence on the role of patents in the survival and exit strategies of new firms. To fill the gap in the literature, we examine whether the effects of patenting on new firm survival vary according to exit routes (bankruptcy, merger, and voluntary liquidation), while considering the endogeneity of patenting. We use a large-scale sample of new firms in the Japanese manufacturing and information services sectors for the period 2003–2013. The findings indicate that new firms with a higher stock of patents are less likely to go bankrupt. Conversely, new firms with a higher stock of patents are more likely to exit via merger. These findings are consistent, regardless of whether patent stock is measured based on the patent applications or granted patents. Furthermore, we provide evidence that new firms with a higher stock of granted patents are more likely to voluntarily liquidate their businesses. Plain English Summary Can new firms enjoy a “patent premium” in terms of survival and exit outcomes? The findings of this study indicate that (1) patenting reduces the risk of bankruptcy, and (2) it increases the odds of exit via merger and voluntary liquidation. On the one hand, patenting ensures that new firms obtain competitive advantages, and thus, survive in the product market. On the other hand, it enables new firms to pursue successful exit strategies in the markets for ideas. This study concludes that new firms can enjoy a patent premium in terms of survival and exit outcomes. In promoting sustainable economic growth via entrepreneurship, policymakers need to shift their focus from creating more firms to creating innovative firms.

Keywords: Patent; New firm survival; Exit route; Bankruptcy; Merger; Voluntary liquidation; L26; M13; O30 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://link.springer.com/10.1007/s11187-021-00481-w Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:sbusec:v:59:y:2022:i:2:d:10.1007_s11187-021-00481-w

Ordering information: This journal article can be ordered from
http://www.springer. ... 29/journal/11187/PS2

DOI: 10.1007/s11187-021-00481-w

Access Statistics for this article

Small Business Economics is currently edited by Zoltan J. Acs and David B. Audretsch

More articles in Small Business Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().