Max-Planck-Institut für Innovation und Wettbewerb, München, Raum 313
The effects of increases in external funding on ﬁrm-level patenting are empirically investigated. Results indicate that the impact of ﬁnance on inventive activities is more multilayered than commonly suggested. In fact, changes in the level of funding affect value-relevant characteristics of patents ﬁled. In a quasi-natural experimental setup, staggered and country-speciﬁc legislative amendments of the European ﬁnancial market harmonization during the 2000s are utilized as an exogenous shift improving ﬁrms’ access to funding. First, it will be shown that ﬁnancial integration leads to increased bank lending to ex ante ﬁnancially constrained ﬁrms. Second, it will be analyzed whether affected ﬁrms changed their patenting activities. The finding is that increased funding is associated with more patents in quantitative terms but of lower average technological quality and value. Further, affected ﬁrms alternate towards ﬁling fewer explorative (i.e., impactful and generally applicable) but rather incremental patents. By providing new insights on the relation between ﬁnance and ﬁrm-level inventions, the results therefore suggest that it is important to acknowledge potentially diverse effects arising from improved access to funding.
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