NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Patents as Quality Signals? The Implications for Financing Constraints on R&D

Dirk Czarnitzki, Bronwyn H. Hall, Hanna Hottenrott

NBER Working Paper No. 19947
Issued in February 2014
NBER Program(s):   CF   PR

Information about the success of a new technology is usually held asymmetrically between the research and development (R&D)-performing firm and potential lenders and investors. This raises the cost of capital for financing R&D externally, resulting in financing constraints on R&D especially for firms with limited internal resources. Previous literature provided evidence for start-up firms on the role of patents as signals to investors, in particular to Venture Capitalists. This study adds to previous insights by studying the effects of firms' patenting activity on the degree of financing constraints on R&D for a panel of established firms. The results show that patents do indeed attenuate financing constraints for small firms where information asymmetries may be particularly high and collateral value is low. Larger firms are not only less subject to financing constraints, but also do not seem to benefit from a patent quality signal.

download in pdf format
   (247 K)

email paper

A non-technical summary of this paper is available in the July 2014 NBER digest.  You can sign up to receive the NBER Digest by email.

This paper was revised on February 19, 2015

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19947

Published: Economics of Innovation and New Technology 25 (3): 197-217. citation courtesy of

Users who downloaded this paper also downloaded* these:
Acemoglu, Laibson, and List w19851 Equalizing Superstars: The Internet and the Democratization of Education
Conti, Thursby, and Thursby w19191 Patents as Signals for Startup Financing
Moser, Voena, and Waldinger w19962 German-Jewish Emigres and U.S. Invention
Hall and Lerner w15325 The Financing of R&D and Innovation
Adelino, Ma, and Robinson w19845 Firm Age, Investment Opportunities, and Job Creation
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us