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Creditor rights and innovation: Evidence from patent collateral

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  • Mann, William

Abstract

I show that patents are pledged as collateral to raise significant debt financing, and that the pledgeability of patents contributes to the financing of innovation. In 2013, 38% of US patenting firms had previously pledged patents as collateral, and these firms performed 20% of research and development expense and patenting in Compustat. Employing court decisions as a source of exogenous variation in creditor rights, I show that patenting companies raised more debt, and spent more on R&D, when creditor rights to patents strengthened. Subsequently, these companies exhibited a gradual increase in patenting output and the use of patents as collateral.

Suggested Citation

  • Mann, William, 2018. "Creditor rights and innovation: Evidence from patent collateral," Journal of Financial Economics, Elsevier, vol. 130(1), pages 25-47.
    • Handle: RePEc:eee:jfinec:v:130:y:2018:i:1:p:25-47
    DOI: 10.1016/j.jfineco.2018.07.001
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    More about this item

    Keywords

    Patents; Innovation; Corporate investment; Law and finance;
    All these keywords.

    JEL classification:

    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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