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Financing Innovation: The Role of Patent Examination

Author

Listed:
  • Billington, Stephen D.

    (Ulster University Business School, Ulster University)

  • Colvin, Christopher L.

    (Queen's Business School, Queen's University Belfast)

  • Coyle, Christopher

    (Queen's Business School, Queen's University Belfast)

Abstract

We examine how the design of the patent system shapes firms' access to finance. We exploit a UK reform that introduced substantive examination into the patent application process, improving the quality of information available to investors about the value of firms' innovation. Using a newly compiled dataset of officially listed corporations, we find that firms with examined patents increased their borrowing, reflecting improved access to capital markets, which translated into firm growth. Our results highlight how patent examination can function as a screening mechanism that reduces information asymmetry, strengthens the signalling value of patents, and mitigates financial barriers to innovation.

Suggested Citation

  • Billington, Stephen D. & Colvin, Christopher L. & Coyle, Christopher, 2025. "Financing Innovation: The Role of Patent Examination," CAGE Online Working Paper Series 767, Competitive Advantage in the Global Economy (CAGE).
    • Handle: RePEc:cge:wacage:767
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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • N43 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: Pre-1913
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • 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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