Creditor Rights and Innovation: Evidence from Patent Collateral
UCLA Anderson School
April 27, 2015
Using novel data recording patents pledged as collateral, I show that strong creditor rights facilitate the financing of innovation. In the United States in 2013, 40% of patenting firms had pledged their patents as collateral at some point, and these firms performed 28% of R&D and 22% of patenting. Employing the random timing of court decisions as a source of exogenous variation in creditor rights, I show that patenting companies raised more debt financing when creditor rights to patents strengthened. Consequently, investment and patenting output also increased, as did the technological diversity of the patents produced.
Number of Pages in PDF File: 57
Date posted: April 29, 2014 ; Last revised: April 28, 2015
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