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The role of patents and licenses in securing external finance for innovation

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  • Harhoff, Dietmar

    (Ludwig-Maximilians-Universität Munich)

Abstract

Financing constraints have been discussed as a major obstacle to innovation. Small and medium-sized enterprises and start-ups are particularly concerned by such impediments. Venture capital has emerged as a partial solution in some countries, but is only available for start-up firms with major growth potential. Recently, new intermediaries have attempted to provide external finance to innovative firms based on the firms’ patent portfolios. Patents have been used as collateral or as assets assembled in patent funds seeking to commercialize the patent rights. Patent auctions are indicative of a nascent market for patented technology. This paper presents an overview on the role of patents and licenses, both in the classical sense and as instruments for financing innovation. It also discusses implications of these developments for public policy and the design of patent systems.

Suggested Citation

  • Harhoff, Dietmar, 2009. "The role of patents and licenses in securing external finance for innovation," EIB Papers 11/2009, European Investment Bank, Economics Department.
    • Handle: RePEc:ris:eibpap:2009_011
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    References listed on IDEAS

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    Cited by:

    1. Hanna Hottenrott & Bronwyn H. Hall & Dirk Czarnitzki, 2016. "Patents as quality signals? The implications for financing constraints on R&D," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(3), pages 197-217, April.
    2. Gaétan Rassenfosse, 2012. "How SMEs exploit their intellectual property assets: evidence from survey data," Small Business Economics, Springer, vol. 39(2), pages 437-452, September.
    3. Bibekananda Panda & Sara Joy, 2021. "Intellectual Property Rights-based Debt Financing to Startups: Need for a Changing Role of Indian Banks," Vikalpa: The Journal for Decision Makers, , vol. 46(3), pages 143-152, September.
    4. Dang, Jianwei & Motohashi, Kazuyuki, 2012. "Patent value and liquidity: evidence from patent-collateralized loans in China," MPRA Paper 49547, University Library of Munich, Germany.
    5. Ruslan Galiakhmetov & Paola Giuri & Federico Munari, 2018. "How To Enhance Patent Commercialisation? An Analysis Of Patent Aggregators In Europe," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 22(04), pages 1-30, May.
    6. Colombo, Massimo G. & Croce, Annalisa & Guerini, Massimiliano, 2013. "The effect of public subsidies on firms’ investment–cash flow sensitivity: Transient or persistent?," Research Policy, Elsevier, vol. 42(9), pages 1605-1623.
    7. Bronwyn H Hall, 2019. "Is there a role for patents in the financing of new innovative firms?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 28(3), pages 657-680.
    8. Hochberg, Yael V. & Serrano, Carlos J. & Ziedonis, Rosemarie H., 2018. "Patent collateral, investor commitment, and the market for venture lending," Journal of Financial Economics, Elsevier, vol. 130(1), pages 74-94.
    9. Christopher S. Hayter & Albert N. Link, 2022. "From discovery to commercialization: accretive intellectual property strategies among small, knowledge-based firms," Small Business Economics, Springer, vol. 58(3), pages 1367-1377, March.
    10. Veysov, Alexander & Stolbov, Mikhail, 2011. "The impact of financial sector on innovation activity: theoretical background and new evidence from russian banking sector," MPRA Paper 38747, University Library of Munich, Germany.
    11. Andrea Mina & Henry Lahr, 2018. "The pecking order of innovation finance," LEM Papers Series 2018/31, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    12. Shailu Singh, 2018. "Patenting Matters, Not Patents: Firm Market Value in Indian Manufacturing," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 12(1), pages 67-87, February.
    13. Martin Andersson & Hans Lööf, 2012. "Small business innovation: firm level evidence from Sweden," The Journal of Technology Transfer, Springer, vol. 37(5), pages 732-754, October.

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    More about this item

    Keywords

    entrepreneurship; intellectual property; equity; innovation; finance; venture capital; R&D; financing constraints; funding gaps;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • 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
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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