The Bright Side of Patents

61 Pages Posted: 8 Feb 2016 Last revised: 1 Jan 2025

See all articles by Joan Farre-Mensa

Joan Farre-Mensa

University of Illinois at Chicago - Department of Finance

Deepak Hegde

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

Alexander Ljungqvist

Centre for Economic Policy Research (CEPR); Swedish House of Finance; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 3 versions of this paper

Date Written: February 2016

Abstract

Motivated by concerns that the patent system is hindering innovation, particularly for small inventors, this study investigates the bright side of patents. We examine whether patents help startups grow and succeed using detailed micro data on all patent applications filed by startups at the U.S. Patent and Trademark Office (USPTO) since 2001 and approved or rejected before 2014. We leverage the fact that patent applications are assigned quasi-randomly to USPTO examiners and instrument for the probability that an application is approved with individual examiners’ historical approval rates. We find that patent approvals help startups create jobs, grow their sales, innovate, and reward their investors. Exogenous delays in the patent examination process significantly reduce firm growth, job creation, and innovation, even when a firm’s patent application is eventually approved. Our results suggest that patents act as a catalyst that sets startups on a growth path by facilitating their access to capital. Proposals for patent reform should consider these benefits of patents alongside their potential costs.

Suggested Citation

Farre-Mensa, Joan and Hegde, Deepak and Ljungqvist, Alexander and Ljungqvist, Alexander, The Bright Side of Patents (February 2016). NBER Working Paper No. w21959, Available at SSRN: https://ssrn.com/abstract=2729060

Joan Farre-Mensa (Contact Author)

University of Illinois at Chicago - Department of Finance ( email )

2431 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States

Deepak Hegde

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

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
180
Abstract Views
3,854
Rank
5,214
PlumX Metrics