Debt Financing in the Knowledge Economy: Evidence from Intellectual Property as Loan Collateral

66 Pages Posted: 28 Oct 2022 Last revised: 3 Apr 2024

See all articles by Laurie Ciaramella

Laurie Ciaramella

Télécom Paris; Max Planck Institute for Innovation and Competition

David Heller

Max Planck Institute for Innovation and Competition

Leo Leitzinger

Goethe University Frankfurt

Date Written: April 1, 2024

Abstract

The evolution towards an increasingly knowledge-based economy causes financing gaps worldwide, especially for intangible-rich, bank-dependent firms. This study investigates an exhaustive set of trademarks, patents, and design rights pledged as collateral in loan agreements to provide new evidence on the use of intellectual property (IP) as loan collateral. Our setting allows us to detail the relevance, implications, and determinants of IP assets for secured debt financing. In a quasi-natural experiment, we exploit exogenous variation in the menu of pledgeable assets and show that IP rights do not just serve as an add-on in the overall collateral mass but can be an integral part of loan agreements. Our analyses further disclose that firms deploy distinct IP assets as collateral, mostly trademarks. Granular IP-level analyses show that cash flow attribution is the key determinant for pledgeability irrespective of the IP type. From a managerial perspective, the findings suggest that IP collateralization is a promising strategy, widening the financing opportunities of financially constrained small firms.

Keywords: Debt financing, intellectual property, collateral assets, trademarks, patents

JEL Classification: G32; O32; O34; D23; L14

Suggested Citation

Ciaramella, Laurie and Heller, David and Leitzinger, Leo, Debt Financing in the Knowledge Economy: Evidence from Intellectual Property as Loan Collateral (April 1, 2024). Available at SSRN: https://ssrn.com/abstract=4260877 or http://dx.doi.org/10.2139/ssrn.4260877

Laurie Ciaramella

Télécom Paris ( email )

19 Place Marguerite Perey
Palaiseau, 91120
France

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

David Heller (Contact Author)

Max Planck Institute for Innovation and Competition

Marstallplatz 1
Munich, Bayern 80539
Germany

HOME PAGE: http://www.david-heller.com

Leo Leitzinger

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

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