Patents as Signals for Startup Financing
AbstractWe 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.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19191.
Date of creation: Jun 2013
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Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-05 (All new papers)
- NEP-CFN-2013-07-05 (Corporate Finance)
- NEP-CTA-2013-07-05 (Contract Theory & Applications)
- NEP-CWA-2013-07-05 (Central & Western Asia)
- NEP-ENT-2013-07-05 (Entrepreneurship)
- NEP-IPR-2013-07-05 (Intellectual Property Rights)
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