Citation

Discussion Paper Details

Please find the details for DP11580 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Patents as Substitutes for Relationships

Author(s): Alminas ?aldokas and Farzad Saidi

Publication Date: October 2016

Keyword(s): corporate disclosure, Information Acquisition, innovation, loan contracting and patenting

Programme Area(s): Financial Economics

Abstract: Firms face a trade-off between patenting, thereby disclosing innovation, and secrecy. In this paper, we show how such public-information provision through patents acts as a substitute for private information acquired in financial relationships. As a shock to innovation disclosure, we use the American Inventor's Protection Act that made the content of firms' patent applications public within 18 months after filing, rather than at the grant date. Firms in industries that experienced a greater change in the publicity of their patent applications were significantly more likely to switch lenders. We also consider the reverse link of the substitution relationship, and explore the impact of improved lender informedness following the creation of universal banks on firms' patenting behavior. We find that firms patent less, without negatively altering their investment in innovation and its outcomes, such as new-product announcements.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11580

Bibliographic Reference

?aldokas, A and Saidi, F. 2016. 'Patents as Substitutes for Relationships'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11580