Working Paper: CEPR ID: DP16320
Authors: Alexander Ljungqvist; Deepak Hegde; Manav Raj
Abstract: We study the effects of patent scope and review times on startups and externalities on their rivals. We leverage the quasi-random assignment of U.S. patent applications to examiners and find that grant delays reduce a startup’s employment and sales growth, chances of survival, access to external capital, and future innovation. Delays also harm the growth, access to external capital, and follow-on innovation of the patentee’s rivals, suggesting that quick patents enhance both inventor rewards and generate positive externalities. Broader scope increases a startup’s future growth (conditional on survival) and innovation but imposes negative externalities on its rivals’ growth.
Keywords: patents; innovation; scope; entrepreneurship; venture capital
JEL Codes: D23; G24; L26; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Delays in granting a startup's first patent (O38) | Reduction in employment growth (F66) |
| Delays in granting a startup's first patent (O38) | Reduction in sales growth (F61) |
| Broader patent scope (O34) | Increase in future employment growth (J23) |
| Broader patent scope (O34) | Increase in future sales growth (D25) |
| Longer examination times (C41) | Reduction in follow-on innovation (O36) |
| Broader patent scope (O34) | Negative effect on rivals' employment growth (F66) |
| Faster examination times (C41) | Positive externalities on rivals' growth (O36) |