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Abstract
This thesis analyses the value of patent information to lenders who lend to patenting firms. In particular, it investigates differences in how a firmâ s patent stock is valued by lenders due to differences in industry and product technology. The data sample used contains information on loans to patenting firms in the U.S. over the period 1987 to 2007 and incorporates information on patents granted from 1963 to 2007.
It is well documented that the use of patents differs significantly across industries and product technological class. Previous research has shown that firms in industries classified as having discrete technologies, such as chemicals, drugs, and textiles, are more likely to employ patents for the direct purposes of preventing copying, licensing and protecting core inventions via patent fencing, while firms in industries classified as having complex technologies, such as computers, electronics and communications, are more likely to use patents for negotiations in cross-licensing agreements and for the prevention of suits.
The empirical findings of this thesis support some, but not all of the hypotheses regarding the predicted effect of patenting on loan spreads and how certain characteristics might influence this relationship. In particular, results show that not all firms benefit universally from having higher patent stock. Instead, results support the prediction that lenders take into account a firmâ s industry, and the context of how patents are generally used in that industry, when pricing loans and attributing value to a firmâ s patent stock. Results also support the prediction that lenders value the patenting stock of discrete technology firms above that of complex technology firms, and this relationship is found to be enhanced for smaller firms, younger firms, and those firms with lower levels of fixed-asset tangibility.
Evidence appears to support the case that where lenders value patents, they do so because the context in which the patents are used enables them to effectively reduce information asymmetries. Some patenting contexts, however, are not conducive to reducing information asymmetries, and therefore lenders do not ascribe positive value to additional patents used in this way.