Patent collateral and access to debt

Felix Bracht and Dirk Czarnitzki

No 22-033, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We investigate how intangible capital in form of intellectual property, such as patents, might mitigate financing constraints. While scholars have already argued that patents might have a signalling value reducing information asymmetries between borrowers and lenders, we quantify the value of using patents as collateral with regard to capital access. Although this mechanism of patents in financing further R&D is not new, we are the first to provide a treatment effects study of patent collateral and access to capital. We make use of mandatory collateral registry data in Sweden and the Netherlands to construct panels combining firm-level financial data and patent measures. Estimating conditional difference-in-difference regressions on firms' debt allows deducting treatment effects of using patents as collateral. We find that patent pledging enables Swedish (Dutch) firms to borrow about 21% (26%) more than in the counterfactual situation in which no patents would have been used as collateral. We also find that the collateral value of patents is higher than their signalling value, and a back-of-the-envelope scenario calculation shows that Dutch (Swedish) firms could raise more than € 7 (€ 10) billion additional debt capital if the complete patent portfolios would be pledged, all else constant.

Keywords: Financing Constraints; Collateral; Intangible Assets; Patents; Treatment Effects Estimation (search for similar items in EconPapers)
JEL-codes: G31 O30 O34 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-eur, nep-fdg, nep-ino, nep-ipr, nep-sbm and nep-tid
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Working Paper: Patent collateral and access to debt (2022)
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