To Be Financed or Not… - The Role of Patents for Venture Capital-Financing

47 Pages Posted: 23 Apr 2009 Last revised: 28 Mar 2013

Carolin Häussler

University of Passau

Dietmar Harhoff

Max Planck Institute for Innovation and Competition; Ludwig-Maximilians-Universität München; Centre for Economic Policy Research (CEPR)

Elisabeth Mueller

German Graduate School of Management and Law

Date Written: 2012

Abstract

In the presence of asymmetric information, economic agents need to communicate their quality to investors and other parties. While much of the literature focuses exclusively on signaling, we develop a conceptual framework that extends this view with elements of the literature on certification. We derive and test empirically several hypotheses using a sample of British and German companies that seek venture capital (VC). We find that patent applications – as signals from ventures – are positively related to VC-financing. Moreover, applications trigger institutionalized processes at the patent office, which can generate valuable technological and commercial information via search reports, citations and opposition procedures and thus affect VC-financing. Our results highlight the role of signaling, but additional information about venture quality is generated via an institutionalized certification process.

Keywords: signaling, certification, liabilities of newness, venture capital, patent system, biotechnology

JEL Classification: G24, L20, L26, O30, O34

Suggested Citation

Häussler, Carolin and Harhoff, Dietmar and Mueller, Elisabeth, To Be Financed or Not… - The Role of Patents for Venture Capital-Financing (2012). ZEW - Centre for European Economic Research Discussion Paper No. 09-003. Available at SSRN: https://ssrn.com/abstract=1393725 or http://dx.doi.org/10.2139/ssrn.1393725

Carolin Haeussler

University of Passau ( email )

Innstrasse 27
Passau, 94032
Germany

Dietmar Harhoff (Contact Author)

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, 80539
Germany
+49 89 24246 550 (Phone)
+49 89 24246 599 (Fax)

HOME PAGE: http://www.ip.mpg.de

Ludwig-Maximilians-Universität München ( email )

Munich, 80539
Germany

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Elisabeth Mueller

German Graduate School of Management and Law ( email )

Bildungscampus 2
Heilbronn, 74076
Germany

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