Patents and the Success of Venture-Capital Backed Startups: Using Examiner Assignment to Estimate Causal Effects

Abstract

I study how patents affect firm success (initial public offering or acquisition at a high price) in a sample of 2,191 U.S. startups applying for patent protection in the 24 months following their first round of venture capital funding. I observe both successful and unsuccessful patent applications and use a measure of patent examiner leniency as an instrument for getting patents. I find a positive effect of patents on firm success for life science firms but not for information technology firms.

Keywords: Patents, Entrepreneurship, Venture Capital, Patent Examiners, Acquisition, Initial Public Offering

JEL Classification: O34, G24, L26