Creditor rights and innovation: Evidence from patent collateral

William Mann

Journal of Financial Economics, 2018, vol. 130, issue 1, 25-47

Abstract: I show that patents are pledged as collateral to raise significant debt financing, and that the pledgeability of patents contributes to the financing of innovation. In 2013, 38% of US patenting firms had previously pledged patents as collateral, and these firms performed 20% of research and development expense and patenting in Compustat. Employing court decisions as a source of exogenous variation in creditor rights, I show that patenting companies raised more debt, and spent more on R&D, when creditor rights to patents strengthened. Subsequently, these companies exhibited a gradual increase in patenting output and the use of patents as collateral.

Keywords: Patents; Innovation; Corporate investment; Law and finance (search for similar items in EconPapers)
JEL-codes: G32 K22 O32 O34 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (117)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:130:y:2018:i:1:p:25-47

DOI: 10.1016/j.jfineco.2018.07.001

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