Bankrupt Innovative Firms

49 Pages Posted: 24 Jan 2017 Last revised: 1 Jun 2021

See all articles by Song Ma

Song Ma

Yale School of Management; National Bureau of Economic Research (NBER)

(Joy) Tianjiao Tong

Ivey Business School, Western University

Wei Wang

Queen's University - Smith School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: May 31, 2021

Abstract

We study how innovative firms manage their innovation portfolios after filing for Chapter 11 reorganization using three decades of data. We find that they sell off core (i.e., technologically critical and valuable), rather than peripheral, patents in bankruptcy. The selling pattern is driven almost entirely by firms with greater use of secured debt, and the mechanism is secured creditors exercising their control rights on collateralized patents. Creditor-driven patent sales in bankruptcy have implications for technology diffusion--the sold patents diffuse more slowly under new ownership and are more likely to be purchased by patent trolls.

Keywords: Failed Firms, Innovation, Patent, Bankruptcy, Creditor Control

JEL Classification: G33, O34

Suggested Citation

Ma, Song and Tong, (Joy) Tianjiao and Wang, Wei, Bankrupt Innovative Firms (May 31, 2021). Available at SSRN: https://ssrn.com/abstract=2903003 or http://dx.doi.org/10.2139/ssrn.2903003

Song Ma (Contact Author)

Yale School of Management ( email )

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

HOME PAGE: http://faculty.som.yale.edu/songma/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

(Joy) Tianjiao Tong

Ivey Business School, Western University ( email )

1151 Richmond Street
London, Ontario N6A 5B8
Canada

Wei Wang

Queen's University - Smith School of Business ( email )

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

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