An economics perspective of patenting behavior in small entrepreneurial firms

UNCG Author/Contributor (non-UNCG co-authors, if there are any, appear on document)
Ndeye Astou Aw, Economics (Creator)
The University of North Carolina at Greensboro (UNCG )
Web Site:
Albert Link

Abstract: This dissertation explores the use of patents as an Intellectual Property Protection Mechanism (IPPM) among small entrepreneurial firms both from a theoretical and an empirical perspective. I borrow from the patenting and firm signaling literature to frame my theoretical models and to ask empirical questions with an eye on broadening the scope of the existing literature. I start with a review of the patenting literature which motivated the need to document cross-country differences in patent laws. Theoretically, I model the use of patents among small firms as a signal of technological ability. I propose two patent signaling games where in both, a higher and a lower ability firm try to use the number of patents that they hold to signal their ability. However, in one model, patents are productive and generate higher profits whereas in the other they are not (in appendix B, I develop an augmented signaling model where start-ups are given the choice to either accept or decline an offer). Conditions for the existence of both pooling and separating equilibria are identified. In the pooling equilibria, types cannot be distinguished making patents an ambiguous signal. However, in the separating equilibria, patents are informative. Empirically, I first study relevant covariates that are associated with the use of patents as an IPPM among small firms using a probit model. Next, I make causal inferences about the theoretical models using a two-stage least squares estimator, a control function approach and a “full switching regression approach” to account for heterogenous treatment effects. I use Lewbel’s method of generated instruments combined with other external instruments as a robustness check. The results show that R&D intensity, firm size, market structure, the sector in which the firm operates, human capital and demographic characteristics of founders, firm location (in some instances) are all relevant covariates that are associated with the use of patents as an IPPM among small entrepreneurial firms. The empirical analyses also provided evidence in support of the model in which patents are a signal that do not impact a firm’s productivity measured as sales growth. The data used in the empirical sections come from the Advancing Knowledge-Intensive Innovation for Growth and Social Well-being in Europe (AEGIS) dataset which relate to small entrepreneurial firms in 10 European-Union countries.

Additional Information

Language: English
Date: 2020
Economics of Technology and Innovation, Heterogenous Treatment Effects, Instrumental Variables and Control Function, Intellectual Property and Entrepreneurship, Patents, Signaling Games
Design protection
Intellectual property $x Economic aspects
Small business $x Technological innovations

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