How patenting informs VC investors – The case of biotechnology
Dietmar Harhoff () and
Elisabeth Mueller ()
Authors registered in the RePEc Author Service: Carolin Häussler ()
Research Policy, 2014, vol. 43, issue 8, 1286-1298
In the presence of asymmetric information, economic agents need to communicate their quality to investors and other parties. This paper investigates how information generated during the patenting process affects the ability of new ventures to attract VC financing. While much of the literature on information asymmetries focuses on patent applications, we argue that the entire examination process should be considered, including information that emerges in the course of patent examination and review. We test several hypotheses using a sample of British and German companies that seek venture capital. We find that the filing of patent applications is positively related to VC financing. Moreover, the examination process at the patent office generates valuable technological and commercial information via search reports, citations and opposition procedures which affect the likelihood of VC financing. Our results suggest that the patenting process supports investors in updating their expectations regarding the quality of new ventures.
Keywords: Signaling; Patent system; Liabilities of newness; Venture capital; Biotechnology (search for similar items in EconPapers)
JEL-codes: O30 O34 L20 L26 G24 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:43:y:2014:i:8:p:1286-1298
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