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Intellectual Property Rights and Debt Financing

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  • Paula Suh

Abstract

I examine how the investment and financing of innovation are affected by the contractual allocation of intellectual property rights using a Federal Circuit ruling that strengthened firms’ property rights to employee patents. I find that treatment firms’ total debt-to-assets ratio and R&D spending increase by 18% and 9%, respectively, as the residual control over patents increases firms’ incentives to innovate. These effects are more pronounced when ex ante holdup exposure is high. Furthermore, I find a positive marginal effect of asset complementarity as it limits the decline in employee incentives. Consistently, I show that firms’ ex post asset complementarity improves.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Paula Suh, 2023. "Intellectual Property Rights and Debt Financing," The Review of Financial Studies, Society for Financial Studies, vol. 36(5), pages 1970-2003.
    • Handle: RePEc:oup:rfinst:v:36:y:2023:i:5:p:1970-2003.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhac067
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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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