Patents, Thickets, and the Financing of Early-Stage Firms: Evidence from the Software Industry
The impact of stronger intellectual property rights in the software industry is controversial. One means by which patents can affect technical change, industry dynamics, and ultimately welfare, is through their role in stimulating or stifling entry by new ventures. Patents can block entry, or raise entrants' costs in variety of ways, while at the same time they may stimulate entry by improving the bargaining position of entrants vis-à-vis incumbents, and supporting a "market for technology" which enables new ventures to license their way into the market, or realize value through trade in their intangible assets. One important impact of patents may be their influence on capital markets, and here we find evidence that the extraordinary growth in patenting of software during the 1990s is associated with significant effects on the financing of software companies. Start-up software companies operating in markets characterized by denser patent thickets see their initial acquisition of VC funding delayed relative to firms in markets less affected by patents. The relationship between patents and the probability of IPO or acquisition is more complex, but there is some evidence that firms without patents are less likely to go public if they operate in a market characterized by patent thickets.
|Date of creation:||Nov 2007|
|Date of revision:|
|Publication status:||published as Iain M. Cockburn & Megan J. MacGarvie, 2009. "Patents, Thickets and the Financing of Early-Stage Firms: Evidence from the Software Industry," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 18(3), pages 729-773, 09.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carl Shapiro, 2001.
"Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting,"
in: Innovation Policy and the Economy, Volume 1, pages 119-150
National Bureau of Economic Research, Inc.
- Carl Shapiro, 2003. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting," Law and Economics 0303005, EconWPA.
- Carl Shapiro, 2004. "Navigating the Patent Thicket: Cross Licenses, Patent Pools and Standard Setting," Levine's Working Paper Archive 122247000000000539, David K. Levine.
- Shapiro, Carl, 2000. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting," Competition Policy Center, Working Paper Series qt4hs5s9wk, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Wagner, S. & Cockburn, I., 2010.
"Patents and the survival of Internet-related IPOs,"
Elsevier, vol. 39(2), pages 214-228, March.
- Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September.
- Samuel Kortum & Josh Lerner, 2000. "Assessing the Contribution of Venture Capital to Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 674-692, Winter.
- Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
- Bronwyn H. Hall & Megan MacGarvie, 2006.
"The Private Value of Software Patents,"
NBER Working Papers
12195, National Bureau of Economic Research, Inc.
- Bronwyn Hall, 2004.
"Exploring the patent explosion,"
ESRC Centre for Business Research - Working Papers
wp291, ESRC Centre for Business Research.
- James E. Bessen & Michael J. Meurer, 2006.
"Patent Litigation with Endogenous Disputes,"
American Economic Review,
American Economic Association, vol. 96(2), pages 77-81, May.
- Iain M. Cockburn & Megan J. MacGarvie, 2011.
"Entry and Patenting in the Software Industry,"
INFORMS, vol. 57(5), pages 915-933, May.
- Ashish Arora & Andrea Fosfuri & Alfonso Gambardella, 2004. "Markets for Technology: The Economics of Innovation and Corporate Strategy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511819, June.
- Sakakibara, Mariko & Branstetter, Lee, 2001. "Do Stronger Patents Induce More Innovation? Evidence from the 1988 Japanese Patent Law Reforms," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 77-100, Spring.
- Gompers, Paul A, 1995. " Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, vol. 50(5), pages 1461-89, December.
- James Bessen & Eric Maskin, 2009.
"Sequential innovation, patents, and imitation,"
RAND Journal of Economics,
RAND Corporation, vol. 40(4), pages 611-635.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:13644. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.