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

70 Pages Posted: 17 Dec 2015 Last revised: 25 Dec 2018

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: December 22, 2018

Abstract

We provide evidence on the value of patents to startups by leveraging the quasi-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' (December 22, 2018). 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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