Patents as quality signals? The implications for financing constraints on R&D

Arbeitspapier

Information about the success of a new technology is usually held asymmetrically between the research and development (R&D)-performing firm and potential lenders and investors. This raises the cost of capital for financing R&D externally, resulting in financing constraints on R&D especially for firms with limited internal resources. Previous literature provided evidence for start-up firms on the role of patents as signals to investors, in particular to Venture Capitalists. This study adds to previous insights by studying the effects of firms' patenting activity on the degree of financing constraints on R&D for a panel of established firms. The results show that patents do indeed attenuate financing constraints for small firms where information asymmetries may be particularly high and collateral value is low. Larger firms are not only less subject to financing constraints, but also do not seem to benefit from a patent quality signal.

Object Details

• ISBN: 978-3-86304-132-8
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DICE Discussion Paper ; No. 133

Classification and Topics

• Classification: Wirtschaft ; Innovation and Invention: Processes and Incentives ; Management of Technological Innovation and R&D ; Technological Change: Government Policy
• Subject: Patents ; Quality Signal ; Research and Development ; Financial Constraints ; Innovation Policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Czarnitzki, Dirk ; Hall, Bronwyn H. ; Hottenrott, Hanna
• Event: Veröffentlichung
• (who): Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)
• (where): Düsseldorf
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/93139
• Last update: 10.03.2025, 11:45 AM CET