Selling Innovation in Bankruptcy

65 Pages Posted: 24 Jan 2017 Last revised: 22 Dec 2017

Song Ma

Yale School of Management

(Joy) Tianjiao Tong

Duke University, Fuqua School of Business

Wei Wang

Queen's School of Business

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

Ma, Song and Tong, (Joy) Tianjiao and Wang, Wei, Selling Innovation in Bankruptcy (December 21, 2017). Available at SSRN: or

Song Ma (Contact Author)

Yale School of Management ( email )

165 Whitney Ave
P.O. Box 208200
New Haven, CT 06511
United States


(Joy) Tianjiao Tong

Duke University, Fuqua School of Business ( email )

Durham, NC
United States
9199374680 (Phone)

Wei Wang

Queen's School of Business ( email )

143 Union Street
Kingston, Ontario K7L 3N6

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