Patents as Signals for Startup Financing

Annamaria Conti, Jerry Thursby () and Marie Thursby

No 19191, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the role of patents as signals used to reduce information asymmetries in entrepreneurial finance. A theoretical model gives conditions for a unique separating equilibrium in which startup founders file for patents to signal invention quality to investors, as well as appropriating value. The theory allows for heterogeneous investors and examine the optimal match of different types of startups, as defined by the quality of their technology, to investors who differ in the amount of non financial capital they provide. The empirical analysis is consistent with the model's predictions using a novel dataset of Israeli startups that received external funding during the period 1994-2011.

JEL-codes: G14 O16 O3 O34 (search for similar items in EconPapers)
Date: 2013-06
New Economics Papers: this item is included in nep-cfn, nep-cta, nep-cwa, nep-ent, nep-ipr and nep-pr~
Note: IO PR
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Published as Patents as Signals for Startup Financing† Annamaria Conti1, Jerry Thursby1 andMarie Thursby2 The Journal of Industrial Economics Special Issue: SYMPOSIUM ON PATENTS, ENTREPRENEURSHIP AND INNOVATION. Edited by Mark Schankerman Volume 61, Issue 3, pages 592–622, September 2013

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Journal Article: Patents as Signals for Startup Financing (2013)
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