Bankrupt Innovative Firms

Song Ma (), Joy Tianjiao Tong () and Wei Wang ()
Additional contact information
Song Ma: Yale University, New Haven, Connecticut 06520; National Bureau of Economic Research, Cambridge, Massachusetts 02138
Joy Tianjiao Tong: Ivey Business School, Western University, London, Ontario N6G 0N1, Canada
Wei Wang: Queen’s University, Kingston, Ontario K7L 3N6, Canada

Management Science, 2022, vol. 68, issue 9, 6971-6992

Abstract: We study how innovative firms manage their innovation portfolios after filing for Chapter 11 reorganization using three decades of data. We find that they sell off core (i.e., technologically critical and valuable), rather than peripheral, patents in bankruptcy. The selling pattern is driven almost entirely by firms with greater use of secured debt, and the mechanism is secured creditors exercising their control rights on collateralized patents. Creditor-driven patent sales in bankruptcy have implications for technology diffusion—the sold patents diffuse more slowly under new ownership and are more likely to be purchased by patent trolls.

Keywords: innovation; patent collateral; bankruptcy; secured debt; creditor rights (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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