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 348: THE FATE OF PATENTS: AN EXPLORATORY ANALYSIS OF PATENTS AS IPO SIGNALS OF REPUTATIONAL ADVANTAGE

Nada Basir (), Mehdi Beyhaghi () and Ali Mohammadi ()
Additional contact information
Nada Basir: Schulich School of Business, York University., Postal: 4700 Keele Street, Toronto ON, M3J 1P3, , Canada
Mehdi Beyhaghi: College of Business, University of Texas at San Antonio, Postal: One UTSA Circle, San Antonio, , TX 78249-0631,
Ali Mohammadi: 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: Drawing on the reputation literature and signaling theory, this article builds on work that looks at patents as reputation signals. We build a multi-industry database of patents that expire due to lack of maintenance fee payments and test for a relationship between these patents and the firm’s IPO date. We find a significant and positive relationship between the likelihood of patents expiring due to lack of maintenance fee payments and the time to IPO. We also find that patents associated with firms which are not venture capital backed, are more likely to expire. Our findings suggest that patents that are used for signaling intentions are more likely to be underutilized. Implications for research and policy are discussed.

Keywords: Patents; reputation signal; innovation; IPO; intellectual property

JEL-codes: O30; O34

43 pages, March 12, 2014

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