Quick or Broad Patents?
67 Pages Posted: 8 Mar 2020 Last revised: 15 Sep 2020
Date Written: April 23, 2020
We provide causal evidence of the effects of patent scope and review times on startups and externalities on their rivals. We leverage the quasi-random assignment of patent applications to examiners and unique data on all first-time applications filed at the U.S. Patent and Trademark Office since 2001. We find that patent grant delays reduce a startup’s employment and sales growth, its chances of survival, and the quantity and quality of its future innovation. Delays harm both the startup’s and its rivals’ access to external capital, suggesting that quick patents enhance both inventor rewards and generate positive externalities for rivals. Broader scope has nuanced effects. It increases a startup’s future growth (conditional on survival) and its follow-on innovation but imposes negative externalities on its rivals’ subsequent innovation.
Keywords: Patents, innovation, scope, entrepreneurship, venture capital
JEL Classification: D23, G24, L26, O34
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