Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 194: Internal Finance and Patents - evidence from firm-level data

Gustav Martinsson () and Hans Lööf ()
Additional contact information
Gustav Martinsson: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Hans Lööf: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden

Abstract: We find that internal finance resources at the firm-level, measured by cash flow, play a non-trivial role for the number of patent applications, even after controlling for the standard variables of a patent study. The results are based on estimating panel count-data models on a sample of 2,700 Swedish manufacturing firms, with observations from the period 1997-2005. The cash-flow effect is larger during the aftermath of the bursting IT-bubble and for firms that are more likely to be financially constrained. Our results suggest that some firms reduce or stop applying for patents during periods of declining economic activity.

Keywords: Financing constraints; Innovation; Corporate ownership; Intellectual property rights; Firm level panel data

JEL-codes: G32; O31; O34

23 pages, September 28, 2009

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