Selling Innovation in Bankruptcy

67 Pages Posted: 24 Jan 2017 Last revised: 8 Feb 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: February 6, 2019


We analyze innovation reallocation in Chapter 11 bankruptcies of innovative firms. Patent sales in bankruptcy are prevalent and occur immediately after filing. Firms sell their core (i.e., technologically critical to the business), rather than their peripheral innovation. The selling pattern concentrates in firms with strong control of creditors, who demand core and high-quality patents as collateral ex ante. Patents sold in bankruptcy receive decreased citations post-sales, have a higher probability of patent troll purchases, and are more likely to separate with inventors. The evidence highlights the incompatibility between creditor control and innovation, which makes innovative firms vulnerable in corporate 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 (February 6, 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 )

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

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