Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96139
Authors: 
Czarnitzki, Dirk
Hall, Bronwyn H.
Hottenrott, Hanna
Year of Publication: 
2014
Series/Report no.: 
ZEW Discussion Papers 14-023
Abstract: 
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.
Subjects: 
Patents
Quality Signal
Research and Development
Financial Constraints
Innovation Policy
JEL: 
O31
O32
O38
Document Type: 
Working Paper

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