Patents and the survival of Internet-related IPOs

Stefan Wagner and Iain Cockburn

Research Policy, 2010, vol. 39, issue 2, 214-228

Abstract: We examine the effect of patenting on the survival prospects of 356 Internet-related firms that made an initial public offering on the NASDAQ at the height of the stock market bubble of the late 1990s. By March 2005, almost 2/3 of these firms had delisted from the exchange. Changes in the legal environment in the US in the 1990s made it much easier to obtain patents on software, and ultimately, on business methods, though less than 1/2 of the firms in our sample obtained, or attempted to obtain, patents. For those that did, we hypothesize that patents conferred competitive advantages that translate into higher probability of survival, though they may also simply be a signal of firm quality. Controlling for other determinants of firm survival, patenting is positively associated with survival. Quite different processes appear to govern exit via acquisition compared to exit via delisting from the exchange due to business failure. Firms that applied for more patents were less likely to be acquired, though if they obtain unusually highly cited patents they may be a more attractive acquisition target. These findings do generally not hold true for "business method" patents, which do not appear to confer a survival advantage.

Keywords: Business; method; patent; Firm; survival; High; tech; start-ups (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (68)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0048-7333(09)00218-2
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Patents and the Survival of Internet-related IPOs (2007)
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:eee:respol:v:39:y:2010:i:2:p:214-228

Access Statistics for this article

Research Policy is currently edited by M. Bell, B. Martin, W.E. Steinmueller, A. Arora, M. Callon, M. Kenney, S. Kuhlmann, Keun Lee and F. Murray

More articles in Research Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().