Financing Innovation: The Role of Patent Examination

Stephen D. Billington, Christopher Colvin and Christopher Coyle
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Stephen D. Billington: Ulster University Business School, Ulster University
Christopher Coyle: Queen's Business School, Queen's University Belfast

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: We examine how the design of the patent system shapes firms' access to finance. We exploit a UK reform that introduced substantive examination into the patent application process, improving the quality of information available to investors about the value of firms' innovation. Using a newly compiled dataset of officially listed corporations, we find that firms with examined patents increased their borrowing, reflecting improved access to capital markets, which translated into firm growth. Our results highlight how patent examination can function as a screening mechanism that reduces information asymmetry, strengthens the signalling value of patents, and mitigates financial barriers to innovation.

Keywords: firm finance; debt; innovation; patents; patent examination; signalling. JEL Classification: G32; N23; N43; O16; O31; O34 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-cfn, nep-ent, nep-eur, nep-fdg, nep-ipr, nep-sbm and nep-tid
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https://warwick.ac.uk/fac/soc/economics/research/c ... tions/wp767.2025.pdf

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Working Paper: Financing innovation: The role of patent examination (2025)
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