Patently Risky: Framing, Innovation and Entrepreneurial Preference

67 Pages Posted: 29 Jun 2017 Last revised: 15 Mar 2021

Date Written: February 10, 2020


It is well known that innovation law and policy must strike a balance between incentivizing inventions on the one hand, and granting monopolies to successful innovators on the other. In achieving this balance, it is commonly presumed that actors in innovation markets respond to their economic environments just like anyone else (at least on a first approximation). This paper presents evidence to the contrary, using a series of controlled experiments. In our experiments, subjects were offered a choice between (a) a monetary payoff with certainty; and (b) a riskier (but potentially more lucrative) option. Our principal manipulation was to alter how the latter option was framed: subjects in the control group were presented with an unadorned choice between safe and risky options, while subjects in the treatment group were confronted with the identical economic choice, but with the risky option framed as an investment in an “innovation-related” project. We find strong evidence that when the risky choice was framed in this way, subjects exhibited significantly less risk aversion, and that they did so across many variations on the experimental setting. We calibrate our results to an equivalent downward “shock” that the innovation-related frame introduces to subjects’ manifest risk preferences. Our findings have implications for legal design questions, not only within intellectual property but also in other legal settings (such as venture capital) where the need to account for people’s risk tolerance plays an important role.

Keywords: Patent Law, Intellectual Property, Experimental Economics, Risk Preferences, Corporate Law

JEL Classification: C9, C92, L2, L26, K1, O34

Suggested Citation

Hoffman, Elizabeth and Schwartz, David L. and Spitzer, Matthew L. and Talley, Eric L., Patently Risky: Framing, Innovation and Entrepreneurial Preference (February 10, 2020). 34 Harv. J. of Law & Tech 192 (2020)., Available at SSRN: or

Elizabeth Hoffman

Iowa State University ( email )

613 Wallace Road
Ames, IA 50011-2063
United States

David L. Schwartz (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States

Matthew L. Spitzer

Northwestern University School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
312-503-8434 (Phone)

Eric L. Talley

Columbia University - School of Law ( email )

435 West 116th Street
New York, NY 10025
United States


European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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