Selling Innovation in Bankruptcy

71 Pages Posted: 24 Jan 2017 Last revised: 27 Mar 2019

See all articles by Song Ma

Song Ma

Yale School of Management

(Joy) Tianjiao Tong

Duke University, Fuqua School of Business

Wei Wang

Smith School of Business

Date Written: March 22, 2019


We analyze patent reallocation in Chapter 11 bankruptcies of innovative firms. Patent sales are prevalent and occur immediately after bankruptcy filing. Firms sell their core (i.e., technologically critical) patents; and this pattern concentrates in firms whose creditors have strong control rights. Creditors demand core patents as collateral ex ante and push for sales in bankruptcy. Additional tests suggest that those patents are not reallocated for more productive uses: patents sold in bankruptcy are less cited under new ownership, more likely to be purchased by patent trolls, and more likely to be separated from their inventors than those sold outside bankruptcy.

Keywords: Bankruptcy, Innovation, Asset Allocation, Creditor Control, 363

JEL Classification: G33, O34

Suggested Citation

Ma, Song and Tong, (Joy) Tianjiao and Wang, Wei, Selling Innovation in Bankruptcy (March 22, 2019). 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

Smith School of Business ( email )

Queen's University-Smith School of Business
143 Union Street
Kingston, Ontario K7L 3N6

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