Patents and Early‐Stage Financing: Matching versus Signaling

Dan H. Vo

Journal of Small Business Management, 2019, vol. 57, issue 4, 1252-1279

Abstract: This paper investigates the role of patents on early‐stage financing. We consider two questions: are patents signals of quality and why do patents relate to venture capital (VC) financing but not angel financing? Analyzing data from 468 Canadian early‐stage ventures, we show that patents are not signals of quality. Instead, the data support a match‐on‐financing need hypothesis: ventures match with VCs, who have financial capacity to support their patent protection strategies.

Date: 2019
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DOI: 10.1111/jsbm.12414

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