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Seminar  |  11/13/2018  |  12:00 PM

Brown Bag Seminar: The Impact of Financial Resources on Corporate Inventions

12:00 - 1:30 p.m., David Heller (Goethe University Frankfurt)

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.


Contact Person: Zhaoxin Pu