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

Xue Yang (), Hao Zhang (), Die Hu () and Bingde Wu ()
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Xue Yang: Sichuan University
Hao Zhang: Sichuan University
Die Hu: Fuzhou University, University Town
Bingde Wu: Fuzhou University, University Town

Small Business Economics, 2023, vol. 60, issue 1, No 17, 403 pages

Abstract: Abstract The expanding practice of accepting patents as collateral for loans has increasingly caught academic attention and the value of a patent has been verified as an important determinant. In this paper, we focus on validity and uncertainty in the context of innovative startups’ patent pledge valuation, arguing that their interplay poses a timing dilemma to lenders. Our empirical tests utilized a database of Chinese innovative startups and their patents for the period 2008–2015. Using patent age as a proxy for time, our findings demonstrate that timing dynamically influences the collateralization potential of a patent. The results also suggest that lenders can use information cues from third parties, such as venture capital backing from the market and high-tech certification from the government, to cope with this timing dilemma, however in different ways. Thus, we advance existing literature on startups’ debt financing by expanding the range of patent collateralization determinants to include dynamic multilevel factors.

Keywords: Patent collateralization; Patent pledge; Venture capital; Government certification (search for similar items in EconPapers)
JEL-codes: G21 L29 M20 O34 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s11187-022-00645-2

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