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Patents and Early‐Stage Financing: Matching versus Signaling

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  • Dan H. Vo

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.

Suggested Citation

  • Dan H. Vo, 2019. "Patents and Early‐Stage Financing: Matching versus Signaling," Journal of Small Business Management, Taylor & Francis Journals, vol. 57(4), pages 1252-1279, October.
    • Handle: RePEc:taf:ujbmxx:v:57:y:2019:i:4:p:1252-1279
    DOI: 10.1111/jsbm.12414
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    Cited by:

    1. Xue Yang & Hao Zhang & Die Hu & Bingde Wu, 2023. "The timing dilemma: understanding the determinants of innovative startups’ patent collateralization for loans," Small Business Economics, Springer, vol. 60(1), pages 371-403, January.

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