DP16320 Quick or Broad Patents? Evidence from U.S. Startups
|Author(s):||Deepak Hegde, Alexander P. Ljungqvist, Manav Raj|
|Publication Date:||July 2021|
|Keyword(s):||entrepreneurship, Innovation, patents, Scope, venture capital|
|JEL(s):||D23, G24, L26, O34|
|Programme Areas:||Financial Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=16320|
We study the effects of patent scope and review times on startups and externalities on their rivals. We leverage the quasi-random assignment of U.S. patent applications to examiners and find that grant delays reduce a startup's employment and sales growth, chances of survival, access to external capital, and future innovation. Delays also harm the growth, access to external capital, and follow-on innovation of the patentee's rivals, suggesting that quick patents enhance both inventor rewards and generate positive externalities. Broader scope increases a startup's future growth (conditional on survival) and innovation but imposes negative externalities on its rivals' growth.