Selling Innovation in Bankruptcy
65 Pages Posted: 24 Jan 2017 Last revised: 22 Dec 2017
Date Written: December 21, 2017
We construct a comprehensive dataset of patent sales in Chapter 11 bankruptcies in all US public firms from 1981 to 2012. We document that 40% of firms sell, on average 18% of, their patents during bankruptcy reorganizations. Innovation sales concentrate in the first two quarters after bankruptcy filing. Firms sell more redeployable and liquid patents, as opposed to selling underexploited patents. This pattern is driven by firms that face "fire-sale" pressures and lack access to external financing. Our results suggest that imminent financing needs in bankruptcy drive innovation sales, and firms proactively avoid market trading frictions in the process.
Keywords: Bankruptcy, Innovation, Patent, Asset Allocation, 363, Liquidity
JEL Classification: G33, O34
Suggested Citation: Suggested Citation