”Deep Pockets” Collateral Assignments of Patents and the Growth of Innovations

Bruno Amable

Description

”Deep Pockets”, Collateral Assignments of Patents, and the Growth of Innovations Bruno Amable? Jean-Bernard Chatelain† Kirsten Ralf‡ February 14, 2005 Abstract This paper studies how imperfect collateral assignments of patents contribute to ”deep pockets” savings of innovative firms facing random investment oppor- tunities in Research and Development (R&D) and determine the growth of their innovations, using a version of the Kiyotaki and Moore [1997] model of credit cy- cles. Results are: patents as collateral leverages R&D finance and magnifies the e?ect of innovative rents on investment; the composition of current versus future financial constraints implies that firms savings decrease the steady state aggre- gate debt/patent ratio; the interaction between households and firms savings determine a leveraged growth of innovations which depends on the imperfection of collateral. Keywords: Collateral, Patents, Research and Development, Credit ra- tioning, Growth. ?University of Paris X and CEPREMAP, 48 Boulevard Jourdan 75014 Paris France. E-mail: †LEO, University of Orleans. E-mail: ‡American University of Paris, 147 rue de Grenelle, 75007 Paris, ESLSCA and CEPREMAP. E-mail: .

• innovation


• economy credit


• intermediate goods


• patent ratio


• households


• between households


• since innovation


• growth


• a?ect economic


• collateral

Sujets

• Châtelain
• Amable
• Innovation
• Intermediate good
• Household
• Growth
• Collatéral

Informations

• Publié par: pefav
• Nombre de lectures: 15
• Langue: English

Extrait

”DeepPockets”,CollateralAssignmentsof Patents,andtheGrowthofInnovations BrunoAmable ∗ Jean-BernardChatelain † KirstenRalf ‡ February14,2005 Abstract Thispaperstudieshowimperfectcollateralassignmentsofpatentscontribute to”deeppockets”savingsofinnovativefirmsfacingrandominvestmentoppor- tunitiesinResearchandDevelopment(R&D)anddeterminethegrowthoftheir innovations,usingaversionoftheKiyotakiandMoore[1997]modelofcreditcy- cles.Resultsare:patentsascollateralleveragesR&Dfinanceandmagnifiesthe effectofinnovativerentsoninvestment;thecompositionofcurrentversusfuture financialconstraintsimpliesthatfirmssavingsdecreasethesteadystateaggre- gatedebt/patentratio;theinteractionbetweenhouseholdsandfirmssavings determinealeveragedgrowthofinnovationswhichdependsontheimperfection ofcollateral. Keywords:Collateral,Patents,ResearchandDevelopment,Creditra- tioning,Growth. ∗ UniversityofParisXandCEPREMAP,48BoulevardJourdan75014ParisFrance.E-mail: [e-mail] † LEO,UniversityofOrleans.E-mail:[e-mail] ‡ AmericanUniversityofParis,147ruedeGrenelle,75007Paris,ESLSCAandCEPREMAP. E-mail:[e-mail].

“Itistheuncertaintycreatedbythislegalandregulatorystructure[in theUnitedStates]whichlendstotheverymarketimperfectionsandineffi- cienciescurrentlyminimizingtheabilitytoleveragethevalueofintellectual propertyassetsandconsequentlystuntingtheeconomicgrowthofinventors andentrepreneurs”Murphy[2002]reporttotheUnitedStatesPatentand TrademarkOffice. “Amoretraditionalinterpretationoftheinnovation-marketpowercor- relationisthatfailuresinfinancialmarketsforcefirmstorelyontheirown supra-normalprofitstofinancethesearchforinnovation.Theavailability ofinternalsourcesoffunding(‘deeppockets’)areusefulforallformsof investment,butmaybeparticularlyimportantforR&D”,Blundell,Griffith andVanReenen[1999]. 1.Introduction Thepracticeoflendersreceivingacollateralassignmentofapatentconditionalupon theoccurrenceofcontinuingdefaultisslowlybecomingmoreandmoreprevalentand importantintheUnitedStates. 1 Wealthcreationisincreasinglybasedoninnovation that,inturn,cangiverisetoimportantintellectualpropertyrights.Formanycom- panies,theseintellectualpropertyrightsmayrepresenttheirmostvaluableassets. Unfortunately,manyinnovatorslackthecapitalnecessarytodevelopnewresearch andmustturntooutsidesourcesforfunding.Aspartofthefunding,theproviders ofcapitalgenerallyrequirecollateralassignmentsofpatentsorsecurityinterestsin patents.Duetothelimitedavailibilityofcollateral,innovatorsmayfaceanexter- nalfinanceconstraintfosteredbytotheparticularimportanceofadverseselection andmoralhazardproblemswhenfinancingR&D.Thatis,innovatorsdonotdisclose privateinformationonR&Dprojects.Whatismore,aspecificknowledgeofthe researchareamayberequiredforefficientexanteselectionofprojectsandexpost control,whichinvolvesacostlyinvestmentforprovidersofexternalfinance,suchas venturecapitalists(Keuschnigg[2004]).Thereisnowconsiderableempiricalevidence thatvariablesrelatedtofinancingconstraintssuchasleverageand/orcashflowavail- abilityarecorrelatedwithR&Dinvestmentinseveralcountries(seerecentsurveys byBechettiandSierra[2001]andHall[2002] 2 ).Blundell,GriffithandVanReenen 1 PatentRatingsisaUSservicewhichprovidesratingsforpatentsascollateralinformationfor nowseveralyears.InthecontextofU.S.statelawandfederallaw,collateralassignmentofpatents requirestofollowanumberofpracticaltipstolimitpotentiallegalrisksandlegalcosts(Schavey Ruff[2003]). 2 e.g.studiesbyHimmelbergandPetersen[1994],Blundell,GriffithandVanReenen[1999],Hall, Mairesse,BranstetterandCrepon[1999],Geroski,VanReenenandWalters[2001],Aghion,Bloom, Blundell,GriffithandHowitt[2002]. 2