What Is a Patent Worth? Evidence from the U.S. Patent 'Lottery'

57 Pages Posted: 17 Dec 2015 Last revised: 15 Mar 2017

See all articles by Joan Farre-Mensa

Joan Farre-Mensa

Northeastern University, D'Amore-McKim School of Business

Deepak Hegde

New York University (NYU) - Leonard N. Stern School of Business

Alexander Ljungqvist

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 3 versions of this paper

Date Written: March 14, 2017

Abstract

We provide evidence on the value of patents to startups by leveraging the random assignment of applications to examiners with different propensities to grant patents. Using unique data on all first-time applications filed at the U.S. Patent Office since 2001, we find that startups that win the patent “lottery” by drawing lenient examiners have, on average, 55% higher employment growth and 80% higher sales growth five years later. Patent winners also pursue more, and higher quality, follow-on innovation. Winning a first patent boosts a startup’s subsequent growth and innovation by facilitating access to funding from VCs, banks, and public investors.

Keywords: Patents, innovation, R&D, entrepreneurship, venture capital

JEL Classification: D23, G24, L26, O34

Suggested Citation

Farre-Mensa, Joan and Hegde, Deepak and Ljungqvist, Alexander, What Is a Patent Worth? Evidence from the U.S. Patent 'Lottery' (March 14, 2017). USPTO Economic Working Paper 2015-5. Available at SSRN: https://ssrn.com/abstract=2704028 or http://dx.doi.org/10.2139/ssrn.2704028

Joan Farre-Mensa

Northeastern University, D'Amore-McKim School of Business ( email )

Boston, MA 02115
United States

Deepak Hegde (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Alexander Ljungqvist

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street, Suite 9-160
New York, NY 10012-1126
United States
212-998-0304 (Phone)
212-995-4220 (Fax)

HOME PAGE: http://pages.stern.nyu.edu/~aljungqv

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

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