Venture Capital, Patenting, and Usefulness of Innovations
Simona Fabrizi (),
Steffen Lippert (),
Pehr-Johan Norbäck () and
No 8392, CEPR Discussion Papers from C.E.P.R. Discussion Papers
We analyze incentives to develop entrepreneurial ideas for venture capitalists (VCs) and incumbent firms. If VCs are sufficiently better at judging an idea's value and if it is sufficiently more costly to patent low than high value ideas, VCs acquire valuable ideas, develop them beyond the level incumbents would have chosen, and use patents to signal their companies' high value to acquirers prior to exiting. This increases the VC-backed companies' patenting intensity and long-run performance, but also infl ates their acquisition prices, and lowers their acquirers' overall profits. Patent law usefulness clauses would reduce such excessive, signaling-driven investment and patenting intensity.
Keywords: innovation; patent law; patenting intensity; preemptive vs late acquisition strategies; signaling; usefulness requirement; venture capital (search for similar items in EconPapers)
JEL-codes: C70 D21 D82 G24 L26 M13 O31 O34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-ent and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at email@example.com
Working Paper: Venture Capitalists, Asymmetric Information, and Ownership in the Innovation Process (2008)
Working Paper: Venture Capitalists, Asymmetric Information and Ownership in the Innovation Process (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:cpr:ceprdp:8392
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=8392
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ..
Series data maintained by (). This e-mail address is bad, please contact .