Working Paper: NBER ID: w23268
Authors: Joan Farre-Mensa; Deepak Hegde; Alexander Ljungqvist
Abstract: We provide evidence on the value of patents to startups by leveraging the quasi-random assignment of applications to examiners with different propensities to grant patents. Using unique data on all first-time applications filed at the U.S. Patent Office since 2001, we find that startups that win the patent “lottery” by drawing lenient examiners have, on average, 55% higher employment growth and 80% higher sales growth five years later. Patent winners also pursue more, and higher quality, follow-on innovation. Winning a first patent boosts a startup’s subsequent growth and innovation by facilitating access to funding from VCs, banks, and public investors.
Keywords: patents; startups; innovation; venture capital; economic growth
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 |
|---|---|
| patent approval (O38) | employment growth (O49) |
| patent approval (O38) | sales growth (O49) |
| first patent (O34) | likelihood of securing VC funding (G24) |
| first patent (O34) | chances of raising a loan (G21) |
| first patent (O34) | number of subsequent patents filed (O34) |
| first patent (O34) | average citations per subsequent patent (O34) |
| first patent (O34) | startup growth and innovation (O35) |
| patent grants (O38) | startup success (M13) |