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Research: Publikationen

This paper investigates the effects of financial market integration on firm-level external debt financing and subsequent inventive activities. To this end, I exploit the implementation of the Financial Services Action Plan (FSAP) as a positive exogenous shift integrating European banking markets during the 2000s. My findings show that higher integration relaxes financing constraints, with significant positive effects on firms' use of debt and interest burden, particularly for ex-ante financially constrained firms. Moreover, financial integration spurs innovative activities in terms of patenting of those firms that benefited from the reforms. Considering a variety of qualitative dimensions shows that lifting financing constraints improves patent quality for a subset of previously constrained firms with low ex-ante patenting intensities (entrants) while adversely affecting the inventive output of incumbent patenters in the spirit of a quantity-quality tradeoff. These findings highlight the key function of a conducive financing environment for inventive activities but also reveal unintended limitations of policy-induced improvements in access to financing.

As a promising strategy, firms can use their intellectual property rights (IPR) as collateral to secure debt financing. Despite an ongoing shift to a more technology-based economy, the collateralizing of IPR is still trailing behind the use of more traditional asset classes. In this paper, we develop a new taxonomy on the key determinants of using IPR as collateral. The taxonomy defines two pillars that govern the use of IPR collateral that distinguish between institutional and economic determinants. The institutional determinants cover contract law, IPR registries, and banking regulation. The economic determinants constitute the influence of IPR characteristics on the trade-off between the economic costs and benefits of collateralizing IPR. We propose that IPR collateral can have significant advantages regarding signaling, agency issues, and the creation of pledgable income. We apply the derived taxonomy to the legal and economic status quo in several industrialized economies to identify potential impediments to IPR-backed debt financing. Taken together, our taxonomy can be viewed as the foundation for future research on IPR as loan collateral for businesses, both in the fields of law and economics.

Enabling or Accelerating? The Timing of Innovation and the Different Roles of Venture Capitalists

(w/ Andrej Gill & Nina A. Michel) -- Access current draft here - Revise & Resubmit at Research Policy.

This paper investigates two pivotal roles in how venture capitalists (VCs) affect their targets' innovative activities. To this end, we explore the timing of patenting around initial VC investments using a novel dataset that combines European firm-, patent-, and investment-level information on first-round targets between 1995 and 2015. In matched sample regressions, we find a positive (enabling) effect of VCs on the quantity and quality of patenting activities, i.e., for targets without pre-VC patenting activity. Results apply persistently over time, suggesting that VCs push for commercialization while also driving sustained patenting. We further find a positive (accelerating) effect for targets with pre-VC patenting, but only for a subset of specifically involved, experienced investors. Multiple tests suggest that selection effects do not drive our findings. The findings improve our understanding of VCs' roles in startup innovation processes and emphasize the diverse effects VCs can have on the trajectories of their target firms.

Inventor Returns and Mobility

(w/ Dietmar Harhoff, Paul P. Momtaz) -- Access the current draft here.

We show that firm and industry, rather than inventor and invention factors,  explain more than half of the variation in inventor returns in administrative employer-inventor-patent linked data from Germany. Between-firm variation in inventive rents is strongly associated with inventor mobility. Inventors are more likely to make a move just before a patent is filed than shortly thereafter and benefit from their move through a mobility-related marginal inventor return. Employers that pay inventor returns in excess of the expected return gain a favorable position in the market for inventive labor with subsequent increases in patent quality and quantity. Consistent with theoretical arguments, these results are sensitive to employers' technological complementarity and degree of competition, and invention quality.

The Rise of Early-Stage Financing in the US and Startup Performance

(w/ Maria Veihl) -- Access the current draft here.

This paper examines startup performance in the context of the Seed Boom, a previously unexplored but significant transformation in the US entrepreneurial financing landscape. Unparalleled by other developments, the frequency of first-round VC investments towards particularly young startups quadrupled within three years during the early 2010s, facilitating the survival of promising but high-risk startups. This shift has received little attention in the academic literature, while its potential (negative) implications in terms of a potential crunch in follow-on investments and startup performance were extensively debated by practitioners at the time. Consistent with the resource-based view but contrary to practitioners' concerns, we find that many Seed-backed startups were able to secure follow-on investments. Similarly, we provide robust evidence that the Seed Boom was not accompanied by a decline in startup performance. As potential mechanisms, we show that Seed-backed startups provide unique business opportunities serving as critical resources, which, however, need the complementary resources provided by VCs to unfold their potential.

Debt Financing in the Knowledge Economy: Evidence from Intellectual Property as Loan Collateral

(w/ Laurie Ciaramella & Leo Leitzinger) -- Access the current draft here.

The evolution towards an increasingly knowledge-based economy causes financing gaps worldwide, especially for intangible-rich, bank-dependent firms. This study investigates an exhaustive set of trademarks, patents, and design rights pledged as collateral in loan agreements to provide new evidence on the use of intellectual property (IP) as loan collateral. Our setting allows us to detail the relevance, implications, and determinants of IP assets for secured debt financing. In a quasi-natural experiment, we exploit exogenous variation in the menu of pledgeable assets and show that IP rights do not just serve as an add-on in the overall collateral mass but can be an integral part of loan agreements. Our analyses further disclose that firms deploy distinct IP assets as collateral, mostly trademarks. Granular IP-level analyses show that cash flow attribution is the key determinant for pledgeability irrespective of the IP type. From a managerial perspective, the findings suggest that IP collateralization is a promising strategy, widening the financing opportunities of financially constrained small firms.

Small and vulnerable? Firm Size and Financing Constraints Dynamics

(w/ Pantelis Karapanagiotis & Øivind Nilsen) -- Access the current draft upon request.

This study analyzes the dynamics of external financing constraints in changing market conditions, comparing small and large firms. Using administrative data from Germany, we quantify firm-level financing constraints without relying on size-based measures and using a disequilibrium model. While we find smaller firms on average more likely to face excess demand for loans, tightening financing conditions during the Great Financial Crisis do not affect them disproportionally, but generally risky borrowers. Post-crisis trends in leveraging, profitability, investments and employment are very similar for both types of firms, while smaller firms respond to the economic slowdown by persistently building up cash buffers.

Google Scholar Profile (link)

Work in progress (selected):

- The Reign of the Great Banks: Financial Development, Firm Performance, and Innovation in Imperial Germany (w/ M. Liebald)

- Empowering to Scale Global: Evidence from the German Accelerator Program (w/ D. Harhoff & D. Kim)

- The Inventor Gender Wage Gap: Microevidence from Germany (w/ P. Momtaz)

- Same, Same, but Different: Founder Similarity and Startup Success (w/ J. Cho)

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