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Little Firms and Big Patents: A Model of Small-Firm Patent Signaling

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  • Wolfgang Gick

Abstract

"Patent strategies of small technology-intensive firms are difficult to explain with standard incentive arguments based on intellectual property rights. This paper develops a rationale for patent filing as a disclosure strategy. We develop a two-sender signaling game to study patenting incentives of two technology start-ups to file in a large-scale patent system with the goal to attract a user firm. Both start-ups may decide to invest in costly modification of their patent application before filing. The paper identifies a separating equilibrium in which the high-quality inventor files and so separates from its technology competitor. Of particular interest is the study of pooling and semi-separating equilibria, as well as the impact of subsidies. We find that a higher quality of a country's inventions, reflected in the possible innovative steps and thus in higher expected profits for foreign user firms, may increase the chance of the relatively lower-quality inventor to enter international technology markets." Copyright (c) 2008, The Author(s) Journal Compilation (c) 2008 Wiley Periodicals, Inc..

Suggested Citation

  • Wolfgang Gick, 2008. "Little Firms and Big Patents: A Model of Small-Firm Patent Signaling," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(4), pages 913-935, December.
  • Handle: RePEc:bla:jemstr:v:17:y:2008:i:4:p:913-935
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    Cited by:

    1. Jorge Luis Juliao Rossi & Fernando Barrios Aguirre & Jana Schmutzler & Iván Darío Sánchez Manchola, 2013. "Relación entre la estrategia de innovación de la firma y su decisión de patentar: evidencia de empresas pertenecientes al sector manufacturero colombiano," ESTUDIOS GERENCIALES, UNIVERSIDAD ICESI, September.
    2. Erik Lehmann & Thorsten Braun & Sebastian Krispin, 2012. "Entrepreneurial human capital, complementary assets, and takeover probability," The Journal of Technology Transfer, Springer, vol. 37(5), pages 589-608, October.
    3. repec:kap:jbuset:v:144:y:2017:i:2:d:10.1007_s10551-015-2816-9 is not listed on IDEAS
    4. Braun, Thorsten V. & Lehmann, Erik E. & Schwerdtfeger, Manuel T., 2011. "The stock market evaluation of IPO-firm takeovers," UO Working Papers 01-11, University of Augsburg, Chair of Management and Organization.
    5. Erik E. Lehmann & Manuel T. Schwerdtfeger, 2016. "Evaluation of IPO-firm takeovers: an event study," Small Business Economics, Springer, vol. 47(4), pages 921-938, December.

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