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Bankrupt Innovative Firms

Author

Listed:
  • Song Ma

    (Yale University, New Haven, Connecticut 06520; National Bureau of Economic Research, Cambridge, Massachusetts 02138)

  • Joy Tianjiao Tong

    (Ivey Business School, Western University, London, Ontario N6G 0N1, Canada)

  • Wei Wang

    (Queen’s University, Kingston, Ontario K7L 3N6, Canada)

Abstract

We study how innovative firms manage their innovation portfolios after filing for Chapter 11 reorganization using three decades of data. We find that they sell off core (i.e., technologically critical and valuable), rather than peripheral, patents in bankruptcy. The selling pattern is driven almost entirely by firms with greater use of secured debt, and the mechanism is secured creditors exercising their control rights on collateralized patents. Creditor-driven patent sales in bankruptcy have implications for technology diffusion—the sold patents diffuse more slowly under new ownership and are more likely to be purchased by patent trolls.

Suggested Citation

  • Song Ma & Joy Tianjiao Tong & Wei Wang, 2022. "Bankrupt Innovative Firms," Management Science, INFORMS, vol. 68(9), pages 6971-6992, September.
    • Handle: RePEc:inm:ormnsc:v:68:y:2022:i:9:p:6971-6992
    DOI: 10.1287/mnsc.2021.4141
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    References listed on IDEAS

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