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What is a Patent Worth? Evidence from the U.S. Patent "Lottery"

Joan Farre-Mensa, Deepak Hegde, Alexander Ljungqvist

NBER Working Paper No. 23268
Issued in March 2017, Revised in December 2018
NBER Program(s):Corporate Finance, Law and Economics, Productivity, Innovation, and Entrepreneurship

We provide evidence on the value of patents to startups by leveraging the quasi-random assignment of applications to examiners with different propensities to grant patents. Using unique data on all first-time applications filed at the U.S. Patent Office since 2001, we find that startups that win the patent “lottery” by drawing lenient examiners have, on average, 55% higher employment growth and 80% higher sales growth five years later. Patent winners also pursue more, and higher quality, follow-on innovation. Winning a first patent boosts a startup’s subsequent growth and innovation by facilitating access to funding from VCs, banks, and public investors.

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Document Object Identifier (DOI): 10.3386/w23268

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