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Patent growth and the long-run performance of VC-backed IPOs

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  • Zhang, Yeqing
  • Zhang, Xueyong

Abstract

This study analyzes the impact of venture capital (VC)-backed IPO firms’ patent growth during the period of VC investment on the long-run performance of stock returns, using data on the China A-share market between 2003 and 2013. The baseline results indicate that VC-backed firms that have generated successful patent filings during the investment period of VCs exhibit superior post-IPO performance compared to other VC-backed firms and non-VC-backed firms in the long run. These results continue to hold under several robustness checks. Overall, we provide a clear, crucial mechanism showing that venture capital improves the long-run performance of IPOs by increasing the number of granted patents of portfolio firms; that is, technological innovation is the major contributing factor to the long-run performance of VC-backed IPOs.

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  • Zhang, Yeqing & Zhang, Xueyong, 2020. "Patent growth and the long-run performance of VC-backed IPOs," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 33-47.
    • Handle: RePEc:eee:reveco:v:69:y:2020:i:c:p:33-47
    DOI: 10.1016/j.iref.2020.04.006
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    More about this item

    Keywords

    Innovation; Patent growth; Long-run performance; Venture capital;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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