Quality Signals? The Role of Patents, Alliances, and Team Experience in Venture Capital Financing

41 Pages Posted: 25 Nov 2012 Last revised: 2 Apr 2014

See all articles by Daniel Hoenig

Daniel Hoenig

Technische Universität München (TUM) - TUM School of Management

Joachim Henkel

TUM School of Management - Technical University of Munich (TUM)

Date Written: February 27, 2014

Abstract

Observable resources, particularly patents, alliances, and team experience, are known to impact a start-up’s ability to attract venture capital financing. In this context they potentially fulfill a two-fold function: as productive assets and, likely, as signals of characteristics of a venture that are not observable at the time of assessment. In particular, patents, alliances, and team experience may serve as signals of the unobservable quality of a venture’s technology. Most existing studies based on firm-level transaction data cannot disentangle signaling from productive effects. Using a conjoint-based survey among 187 European and U.S. venture capitalists, we find they rely on research alliances and, partly, on team experience as signals of technological quality. While patents impact the venture capitalists’ decision making in their property rights function, we find no indication that they serve as technology quality signals.

Keywords: patents, alliances, venture capital, signaling, technology

JEL Classification: M13, O34, G24

Suggested Citation

Hoenig, Daniel and Henkel, Joachim, Quality Signals? The Role of Patents, Alliances, and Team Experience in Venture Capital Financing (February 27, 2014). Available at SSRN: https://ssrn.com/abstract=2180406 or http://dx.doi.org/10.2139/ssrn.2180406

Daniel Hoenig

Technische Universität München (TUM) - TUM School of Management ( email )

Freising
Germany

Joachim Henkel (Contact Author)

TUM School of Management - Technical University of Munich (TUM) ( email )

Arcisstr. 21
Munich, D-80333
Germany

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