LEVERAGING THE (UN)KNOWN: THE VALUE OF PATENT PORTFOLIOS
w/ Andrej Gill -- Access the current draft here.
We provide new evidence on the relevance of patents for attracting external debt financing. For a representative, multi-country sample, we find large positive effects of valuable patent portfolios on firms' debt capacity. To study this, we develop a novel patent portfolio value measure using granular information on patent fee payments. For identification, we investigate exogenous variation in patent strength arising from the staggered implementation of the 2004 EU Enforcement Directive. Results are strongest for financially constrained firms, which emphasizes the strategic potential of patents. Moreover, our findings highlight the importance of a harmonized, reliable legal framework to spur these effects.
NO PRESSURE, NO DIAMONDS? FINANCING CONSTRAINTS AND THEIR QUANTITY-QUALITY EFFECTS ON INVENTIONS
Access the current draft here.
This paper explores the effect of policy-induced reductions in financing constraints on the quantity and quality of firm-level inventions, namely patents. To study this, I utilize exogenous variation in access to funding arising from the staggered adoption of a major EU policy initiative harmonizing financial markets across member states. Relaxing financing constraints boosts firms' patent filings but also leads to a modest decline in patent quality along several dimensions, suggesting negative marginal returns. However, effects on patent quality are reversed for firms with low initial patenting activities, which highlights the relevance of proper funding to spur commercialization of early-stage inventions.
SMALL AND VULNERABLE? FINANCING CONSTRAINTS DURING ECONOMIC CRISES
w/ Pantelis Karapanagiotis & Øivind A. Nilsen -- Access the current draft here.
This study investigates how SMEs and larger firms' financing conditions and real behavior change during periods of severe decline in economic activity. Literature suggests a higher vulnerability of small firms which is constituted in the various proxies of financing constraints which consider size as one key ingredient. Using these measures makes comparing effects on different size categories of firms virtually impossible. By exploiting high quality, proprietary data from official sources on German firms, we are able to study differential effects between small and large firms without depending on size as a measure of financial restrictiveness itself. Our analysis uses the Financial Crisis of 2008 as an exogenous event adversely affecting the banking market. We show that SME are on average more likely to face excess demand for bank loans as compared to large firms. Contrasting theoretical predictions, however, results further suggest that the worsened financing conditions did not affect SME in a disproportionate manner. It is rather the availability of non-bank sources and firms' riskiness determining the degree of financing constraints. Our results suggest that it is more efficient to address the underlying causes of (small) firms' vulnerability during economic slowdowns instead enhancing access to funding for SME in general.
FINANCIAL INTEGRATION, FINANCING CONSTRAINTS, AND INNOVATION IN EUROPE:
IS MORE BETTER?
w/ Uwe Walz & Jan Krzyzanowski -- Access the current draft on request.
A large number of policy initiatives in the European Union and its member states are grounded in the assumption that there is a gap between the demand and supply for financial resources to fund innovations. We approach this assumption by analysing not only how innovations are financed but also whether changes in the availability of funding affect the type and amount of inventions firms actually introduce to the market. In contrast to most existing studies, we focus on firms domiciled in Europe. For this purpose, different European policy initiatives are utilized to analyze the effects of firms’ access to finance on their patenting activities. To provide a comprehensive picture, two complementing initiatives are considered in a European context: i) policies which entailed a negative impact on firms’ access to external sources of finance (EBA capital exercise) as well as ii) those helping to mitigate financing constraints (FSAP). The findings indicate that more finance does not enhance innovative activity per se and less finance is not harmful for firms’ outcomes of their innovative activities by itself. Against the background of our results, we derive several policy recommendations.
ONGOING RESEARCH PROJECTS
- A Taxonomy on the Use of Intellectual Property Rights as Business Loan Collateral (w/ L. Leitzinger & U. Walz)
- A more Complete Picture on the Collateralization of Intellectual Property (w/ L. Ciaramella & L. Leitzinger)
- Accelerator, Enabler, or Extrator? The Role of Venture Capitalists on Patenting (w/ A. Gill & N. Gruzdov)
- Does early-stage Financing spoil the Breed? Evidence from the US Seed Boom (w/ M. Kurakina)
- Green Capitalists and the Effect of Weather on their Investment Decisions (w/ F. Bracht)
European Patent Office ARP programm (link)