Patent Strategies of Small High-tech Firms in a Broader Context: the Case of International Learning

The current paper explores the patenting behavior of small high-tech firms in a wider strategic context. It particularly addresses why small high-tech firms apply for patents and what makes them not to do so, and connects this with international learning. The general idea is that small high-tech firms suffer from shortage in resources causing them to be reluctant in application for patents. However, not having protected their inventions by patents may weaken their position in attracting investment capital and in establishing strategic relationships, including learning relationships abroad. Drawing on the literature and on survey data of 100 academic spin-off firms, the influence of patent behavior (among other factors) on adoption of international learning is estimated. It appears that half of the spin-off firms works with inventions protected by patents and that a slightly larger share (60%) has adopted the strategy of international learning. Our explorative analysis using a logit model of international learning indicates that not having protected inventions through patents tends to block learning in international networks.Artykuł porusza istotną rolę ochrony patentowej firmach technologicznych. Autorzy stawiają pytania: Jakie są przesłanki wnioskowania o ochronę patentową w małych firmach? Dlaczego jedne firmy starają się działać w oparciu o ochronę własności przemysłowej a drugie nie?, na które starają się udzielić odpowiedzi w oparciu o badania. Ważnym zagadnieniem poruszanym w rozdziale jest międzynarodowy proces uczenia się firm ochrony własności intelektualnej. Generalna idea publikacji podkreśla niechęć małych firm technologicznych w aplikowaniu o ochronę patentową. Jednakże można wyraźnie zauważyć, w przypadku braku strategii ochrony patentowej, utratę atrakcyjności inwestycyjnej małych firm ukierunkowanych na rynek międzynarodowy. Artykuł opiera się na analizie źródeł wtórnych i pierwotnych. 100 firm akademickich zostało zbadanych by zidentyfikować wpływ strategii ochrony patentowej na zachowanie się na rynku międzynarodowym. Analiza oparta jest o model wykładniczy uczenia się na rynkach międzynarodowych. Połowa małych firm technologicznych chroni swoją własność przemysłowa patentem a wśród nich trzy na pięć firm adoptuje wiedzę z rynków międzynarodowych. Te firmy, które nie stosują ochrony patentowej niewątpliwie blokują sobie możliwości uczenia się na rynkach zagranicznych.Druk materiałów sfinansowano ze środków Ministerstwa Nauki i Szkolnictwa Wyższego w ramach projektu „Kreator innowacyjności – wsparcie innowacyjnej przedsiębiorczości akademickiej”

On Competition and the Strategic Management of Intellectual Property in Oligopoly

An innovative firm with private information about its indivisible process innovation chooses strategically whether to apply for a patent with probabilistic validity or rely on secrecy. By doing so, the firm manages its rivals’ beliefs about the size of the innovation, and affects the incentives in the product market. A Cournot competitor tends to patent big innovations, and keep small innovations secret, while a Bertrand competitor adopts the reverse strategy. Increasing the number of firms gives a greater (smaller) patenting incentive for Cournot (Bertrand) competitors. Increasing the degree of product substitutability increases the incentives to patent the innovation

Innovation and venture capital exit performance

Venture capital is a potent source of R&D financing which contributes significantly to technological innovation output in the form of patented inventions. Scholars have argued that tighter protection of intellectual property rights reduces expropriation risks and encourages venture capitalists to invest in technology firms. Prior studies have showed that early stage technology investors give much weight to investment selection criteria related to innovation e.g. protection of intellectual property, platform and uniqueness. However, VC investors generally receive little on their investments until a liquidation event occurs – IPO and M&A (trade sale) exits define venture capital performance. A review of the literature indicates that few empirical studies have examined the influence of patented innovation on the exit performance of VC-backed technology firms. This paper seeks to address this specific knowledge gap in venture capital research and practice. It builds on resource-based view (RBV) theory which argues that technological innovation is an important strategic resource of the entrepreneurial firm that can attract VC investment, provide competitive advantage and produce superior performance. This study is based on matched data compiled from VentureXpertTM, DelphionTM and NBER/USPTO databases. The resulting unique and proprietary dataset consists of 1504 U.S. VC-backed exits across 7 technology sectors in the 20 years from 1980-2000, 961 IPOs and 543 M&As. The influence of technological innovation on the exit performance of VC-backed technology firms is examined. As predicted by RBV theory, technology firms engaged in patenting activity were found more likely to be associated with the more profitable IPO exit route, higher VC investment and exit value

Using Patents to Mislead Rivals

Recent surveys report that firms claim they do not rely heavily on patents in order to appropriate a return on their innovation. Yet, firms do patent, as indicated by the large number of patents that are granted. This paper offers a possible resolution to this puzzle. It takes a simplified version of a duopoly innovation race, and studies the patenting decision of an innovator who has private information about the improvability of her innovation. In this setting, it is shown that a firm may use the patenting decision to mislead her rival. Under symmetric information, research can be stimulated but not disclosed. However, under asymmetric information, disclosure is more likely even though the incentive to do research may be weakened.

The Patenting Behavior of Academic Founders

This study explores why academic entrepreneurs patent their inventions before and after creating a firm. Drawing on start-up data combined with patent data, we specifically examine the impact of five, relatively under-researched factors (scientific field, pace of technological development, technological uncertainty, entrepreneurial orientation, and patent effectiveness. The study shows that some scientific fields, technological uncertainty, and patent effectiveness are positively related to patent propensity, both before and after founding. The effects of pace of technological development and entrepreneurial orientation were timespecific. Our study suggests that patenting by academic entrepreneurs is driven by special rationales and that prior research on full-time scientists and established firms does not necessarily generalize to them. We discuss the implications of our findings both in terms of contribution to the current literature and technology transfer policies. --academic patenting

Secrecy versus patents: process innovations and the role of uncertainty

Whilst firms often prefer secrecy to patents and process innovations particu- larly lend themselves to secrecy, we establish a rationale for process innovators who patent. Using a simple two-period model, we show that under myopic op- timisation, the incentive to patent rather than pursue secrecy increases as the probability that the rival firm attaches to it being low-cost falls and as the pro- portion of the cost reduction due to the innovation, secured by the rival firm in the period after the patent has expired, falls. However, the gain to the innovating firm from patenting rather than secrecy strictly increases if the cost reduction due to the innovation is sufficiently small that the high-cost firm could profitably bluff that it is low-cost. Finally, allowing the low-cost firm the option of using an output signal in such cases, may make the patent strategy more or less attractive relative to the case of myopic optimisation

Patent Signals of IPO Performance: Evidence from High- and Low-Tech Industries in Japan

Abstract: Prior studies pointed to evidence that startups and venture capital (VC) companies tended to use different measures to provide signals to outsiders. This study adds to those previous insights by focusing on established firms’ patenting behaviors and their effect on the amount of money raised at the initial public offering (IPO). Since technology intensity may differ considerably between high and low-tech companies, our main interest in this paper lies on whether the significance of pre-IPO patenting activities as a predictor of IPO performance also varies between these two industry categories. Using cross-sectional data representing 308 Japanese industrial firms’ IPO commitments between 2000 and 2015, we find a robust positive correlation between patent applications and IPO performance. Contrary to the conventional wisdom proposing that high-tech firms with more patenting activities achieve better IPO performance, we show that the signaling power of patenting is stronger for the low-tech companies in our sample: While the high-tech firms do not seem to have significantly benefited from a patent signal, the low-tech firms seem to have attracted external investors more easily due to patenting at the IPO. Keywords:  Patent, signal, initial public offering (IPO), high-tech industries, low-tech industrie