Back
 AJIBM  Vol.6 No.12 , December 2016
Does Venture Capital Investment Lead to a Change in Start-Ups’ Intellectual Property Strategies?
Abstract: This paper examines the influence of venture capital (VC) funding on start-ups’ intellectual property (IP) strategies. More specifically, the number of additionally filed patent and trademark applications after subsequent VC funding rounds is investigated. The results from the analysis of 531 start-ups show that VC funding has a strong influence on consecutive IP strategy. Already first funding rounds lead to a remarkable growth of start-ups’ IP portfolios. Yet, although VCs especially promote product commercialization of start-ups, a greater growth of trademark compared to patent portfolios cannot be identified. However, this changes during the progress along the venture cycle.
Cite this paper: Sandner, P. , Dufter, C. and Geibel, R. (2016) Does Venture Capital Investment Lead to a Change in Start-Ups’ Intellectual Property Strategies?. American Journal of Industrial and Business Management, 6, 1146-1173. doi: 10.4236/ajibm.2016.612107.
References

[1]   Audretsch, D.B., Bönte, W. and Mahagaonkar, P. (2012) Financial Signaling by Innovative Nascent Ventures: The Relevance of Patents and Prototypes. Research Policy, 41, 1407-1421.
https://doi.org/10.1016/j.respol.2012.02.003

[2]   Gans, J.S. and Stern, S. (2003) The Product Market and the Market for “Ideas”: Commercialization Strategies for Technology Entrepreneurs. Research Policy, 32, 333-350.
https://doi.org/10.1016/S0048-7333(02)00103-8

[3]   Gruber, M. (2004) Marketing in New Ventures: Theory and Empirical Evidence. Schmalenbach Business Review, 56, 164-199.

[4]   Achleitner, A.-K. and Nathusius, E. (2004) Venture Valuation—Bewertung von Wachstum-sunternehmen: Klassische und neue Bewertungsverfahren mit Beispielen und Übungsaufgaben. Schäffer-Poeschel, Stuttgart.

[5]   Gompers, P.A. and Lerner, J. (2004) The Venture Capital Cycle. 2nd Edition, MIT Press, Cambridge.

[6]   Shane, S. and Stuart, T. (2002) Organizational Endowments and the Performance of University Start-Ups. Management Science, 48, 154-170.
https://doi.org/10.1287/mnsc.48.1.154.14280

[7]   Cao, J.X. and Hsu, P.-H. (2011) The Informational Role of Patents in Venture Capital Financing. Working Paper. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1678809

[8]   De Clercq, D., Fried, V. H., Lehtonen, O. and Sapienza, H. J. (2006) An Entrepreneur’s Guide to the Venture Capital Galaxy. Academy of Management Perspectives, 20, 90-112.
https://doi.org/10.5465/AMP.2006.21903483

[9]   Mann, R.J. and Sager, T.W. (2007) Patents, Venture Capital, and Software Start-Ups. Research Policy, 36, 193-208.
https://doi.org/10.1016/j.respol.2006.10.002

[10]   Bertoni, F., Croce, A. and D’Adda, D. (2010) Venture Capital Investments and Patenting Activity of High-Tech Start-Ups: A Micro-Econometric Firm-Level Analysis. Venture Capital, 12, 307-326.
https://doi.org/10.1080/13691066.2010.486157

[11]   De Vries, G., Pennings, E. and Block, J.H. (2013) Trademark or Patent? The Effects of Market Structure, Customer Type and Venture Capital Financing on Start-Ups’ IP Decisions. Working Paper. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2247281

[12]   Hirukawa, M. and Ueda, M. (2011) Venture Capital and Innovation: Which Is First? Pacific Economic Review, 16, 421-465.
https://doi.org/10.1111/j.1468-0106.2011.00557.x

[13]   Kortum, S. and Lerner, J. (2000) Assessing the Contribution of Venture Capital to Innovation. RAND Journal of Economics, 31, 674-692.
https://doi.org/10.2307/2696354

[14]   Haeussler, C., Harhoff, D. and Mueller, E. (2009) To Be Financed or Not—The Role of Patents for Venture Capital Financing. Working Paper.
http://ftp.zew.de/pub/zew-docs/dp/dp09003.pdf

[15]   Cockburn, I.M. and MacGarvie, M.J. (2009) Patents, Thickets and the Financing of Early-Stage Firms: Evidence from the Software Industry. Journal of Economics & Management Strategy, 18, 729-773.
https://doi.org/10.1111/j.1530-9134.2009.00228.x

[16]   Graham, S.J., Robert P., Samuelson, P. and Sichelman, T. (2010) High Technology Entrepreneurs and the Patent System: Results of the 2008 Berkeley Patent Survey. Berkeley Technology Law Journal, 24, 1255-1328.

[17]   Hayes, D.L. (1999) What the General Intellectual Property Practitioner Should Know about Patenting Business Methods. The Computer Lawyer, 16, 3-18.

[18]   Hsu, D.H. and Ziedonis, R.H. (2007) Patents as Quality Signals for Entrepreneurial Ventures. Working Paper. http://proceedings.aom.org/content/2008/1/1.191

[19]   Hellmann, T. and Puri, M. (2000) The Interaction between Product Market and Financing Strategy: The Role of Venture Capital. The Review of Financial Studies, 13, 959-984.
https://doi.org/10.1093/rfs/13.4.959

[20]   Conti, A., Thursby, M. and Rothaermel, F.T. (2011) Show Me the Right Stuff: Signals for High-Tech Startups. NBER Working Paper Series, Working Paper No. 17050.
http://www.nber.org/papers/w17050
https://doi.org/10.3386/w17050


[21]   Block, J.H., de Vries., G., Sandner, P.G. and Schumann, J.H. (2012) Trademarks and Venture Capital Funding. Working Paper.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2064508

[22]   Hellmann, T.F. and Puri, M. (2002) Venture Capital and the Professionalization of Start-Up Firms: Empirical Evidence. The Journal of Finance, 57, 169-197.
https://doi.org/10.1111/1540-6261.00419

[23]   Griliches, Z. (1990) Patent Statistics as Economic Indicators: A Survey. Journal of Economic Literature, 28, 1661-1707.
https://doi.org/10.3386/w3301

[24]   WIPO (2007) Intellectual Property-Some Basic Definitions.
http://www.wipo.int/about-ip/en/

[25]   Cohen, W.M., Nelson, R.R. and Walsh, J.P. (2000) Protecting Their Intellectual Assets: Appropriability Conditions and Why US Manufacturing Firms Patent (or Not). NBER Working Paper Series, Working Paper No. 7552. http://www.nber.org/papers/w7552
https://doi.org/10.3386/w7552


[26]   Gans, J.S., Hsu, D.H. and Stern, S. (2002) When Does Start-Up Innovation Spur the Gale of Creative Destruction? RAND Journal of Economics, 33, 571-586.
https://doi.org/10.2307/3087475

[27]   Arora, A., Ceccagnoli, M. and Cohen, W.M. (2008) R&D and the Patent Premium. International Journal of Industrial Organization, 26, 1153-1179.
https://doi.org/10.1016/j.ijindorg.2007.11.004

[28]   Granstrand, O. (2000) The Economics and Management of Intellectual Property: Towards Intellectual Capitalism. Edward Elgar, Cheltenham.

[29]   Long, C. (2002) Patent Signals. The University of Chicago Law Review, 69, 625-679.
https://doi.org/10.2307/1600501

[30]   Mansfield, E. (1986) Patents and Innovation: An Empirical Analysis. Management Science, 32, 173-181.
https://doi.org/10.1287/mnsc.32.2.173

[31]   Greenhalgh, C. and Rogers, M. (2006) Intellectual Property Activity by Service Sector and Manufacturing Firms in the UK, 1996-2000. Intellectual Property Research Institute of Australia, Working Paper No. 3/06.
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.509.2012&rep=rep1&type=pdf

[32]   Arundel, A. and Kabla, I. (1998) What Percentage of Innovations Are Patented? Empirical Estimates for European Firms. Research Policy, 27, 127-141.
https://doi.org/10.1016/S0048-7333(98)00033-X

[33]   Helmers, C. and Rogers, M. (2008) Does Patenting Help High-Tech Start-Ups? Working Paper.
http://www.epip.eu/conferences/epip03/papers/Rogers_HelmersRogersEPIPPatents14092008.pdf

[34]   Cockburn, I. M. and Wagner, S. (2007) Patents and the Survival of Internet-Related IPOs. NBER Working Paper Series, Working Paper No. 13146.
http://www.nber.org/papers/w13146
https://doi.org/10.3386/w13146


[35]   Helmers, C. and Rogers, M. (2010) Innovation and the Survival of New Firms in the UK. Review of Industrial Organization, 36, 227-248.
https://doi.org/10.1007/s11151-010-9247-7

[36]   Lerner, J. (1994) The Importance of Patent Scope: An Empirical Analysis. RAND Journal of Economics, 25, 319-333.
https://doi.org/10.2307/2555833

[37]   Cohen, D. (1991) Trademark Strategy Revisited. Journal of Marketing, 55, 46-59.
https://doi.org/10.2307/1252147

[38]   Mendonça, S., Pereira, T.S. and Godinho, M.M. (2004) Trademarks as an Indicator of Innovation and Industrial Change. Research Policy, 33, 1385-1404.
https://doi.org/10.1016/j.respol.2004.09.005

[39]   OHIM (2008) What Is a Trade Mark?
http://oami.europa.eu/ows/rw/pages/CTM/trademark.en.do

[40]   Rujas, J. (1999) Trade Marks: Complementary to Patents. World Patent Information, 21, 35-39.
https://doi.org/10.1016/S0172-2190(99)00023-X

[41]   Economides, N.S. (1988) The Economics of Trademarks. Trademark Reporter, 78, 523-539.

[42]   Landes, W.M. and Posner, R.A. (1987) Trademark Law: An Economic Perspective. Journal of Law and Economics, 30, 265-309.
https://doi.org/10.1086/467138

[43]   Hall, B.H., Helmers, C., Rogers, M. and Sena, V. (2012) The Choice between Formal and Informal Intellectual Property: A Literature Review. NBER Working Paper Series, Working Paper No. 17983. http://www.nber.org/papers/w17983
https://doi.org/10.3386/w17983


[44]   Flikkema, M.J., De Man, A.-P. and Wolters, M. (2010) New Trademark Registration as an Indicator of Innovation: Results of an Explorative Study of Benelux Trademark Data. Working Paper.
http://www.academia.edu/29494866/New_trademark_registration_as_an_indicator_of_innovation_results_of_an_explorative_study_of_Benelux_trademark_data

[45]   Jensen, P.H., Webster, E. and Buddelmeyer, H. (2008) Innovation, Technological Conditions and New Firm Survival. The Economic Record, 84, 434-448.
https://doi.org/10.1111/j.1475-4932.2008.00509.x

[46]   Sahlman, W.A. (1990) The Structure and Governance of Venture-Capital Organizations. Journal of Financial Economics, 27, 473-521.
https://doi.org/10.1016/0304-405X(90)90065-8

[47]   Gompers, P.A. (1995) Optimal Investment, Monitoring, and the Staging of Venture Capital. The Journal of Finance, 50, 1461-1489.
https://doi.org/10.1111/j.1540-6261.1995.tb05185.x

[48]   Fitza, M., Matusik, S.F. and Mosakowski, E. (2009) Do VCs Matter? The Importance of Owners on Performance Variance in Start-Up Firms. Strategic Management Journal, 30, 387-404.
https://doi.org/10.1002/smj.748

[49]   Hsu, D.H. (2004) What Do Entrepreneurs Pay for Venture Capital Affiliation? The Journal of Finance, 59, 1805-1844.
https://doi.org/10.1111/j.1540-6261.2004.00680.x

[50]   Hsu, D.H. (2006) Venture Capitalists and Cooperative Start-Up Commercialization Strategy. Management Science, 52, 204-219.
https://doi.org/10.1287/mnsc.1050.0480

[51]   Ivanov, V.I. and Xie, F. (2010) Do Corporate Venture Capitalists Add Value to Start-Up Firms? Evidence from IPOs and Acquisitions of VC-Backed Companies. Financial Management, 39, 129-152.
https://doi.org/10.1111/j.1755-053x.2009.01068.x

[52]   Caselli, S., Gatti, S. and Perrini, F. (2009) Are Venture Capitalists a Catalyst for Innovation? European Financial Management, 15, 92-111.
https://doi.org/10.1111/j.1468-036X.2008.00445.x

[53]   Engel, D. (2002) The Impact of Venture Capital on Firm Growth: An Empirical Investigation. Working Paper. http://ideas.repec.org/p/zbw/zewdip/895.html

[54]   Conti, A., Thursby, J. and Thursby, M. (2013) Patents as Signals for Startup Financing. NBER Working Paper Series, Working Paper No. 19191.
https://doi.org/10.3386/w19191
http://www.nber.org/papers/w19191

[55]   Stuart, T., Hoang, H. and Hybels, R.C. (1999) Interorganizational Endorsements and the Performance of Entrepreneurial Ventures. Administrative Science Quarterly, 44, 315-349.
https://doi.org/10.2307/2666998

[56]   Connelly, B.L., Certo, S.T., Ireland, R.D. and Reutzel, C.R. (2011) Signaling Theory: A Review and Assessment. Journal of Management, 37, 39-67.
https://doi.org/10.1177/0149206310388419

[57]   Spence, M. (1973) Job Market Signaling. Quarterly Journal of Economics, 87, 355-374.
https://doi.org/10.2307/1882010

[58]   Lemley, M.A. (2001) Rational Ignorance at the Patent Office. Northwestern University Law Review, 95, 1-34.
https://doi.org/10.2139/ssrn.261400

[59]   Baum, J.A. and Silverman, B.S. (2004) Picking Winners or Building Them? Alliance, Intellectual, and Human Capital as Selection Criteria in Venture Financing and Performance of Biotechnology Startups. Journal of Business Venturing, 19, 411-436.
https://doi.org/10.1016/S0883-9026(03)00038-7

[60]   Hisrich, R.D. (1989) Entrepreneurship. McGraw Hill.

[61]   Spann, M., Adams, M. and Wortman, M.S. (1988) Entrepreneurship: Definitions, Dimensions and Dilemmas. In: Proceedings of the Third Annual Conference, US Association for Small Business and Entrepreneurship, Kennesaw, GA, 147-153.

[62]   Sandner, P.G. and Block, J. (2011) The Market Value of R&D, Patents, and Trademarks. Research Policy, 40, 969-985.
https://doi.org/10.1016/j.respol.2011.04.004

[63]   WIPO (2009) Intellectual Property and Small and Medium-Sized Enterprises.
http://www.wipo.int/sme/en/

[64]   Block, J. and Sandner, P. (2009) What Is the Effect of the Financial Crisis on Venture Capital Financing? Empirical Evidence from US Internet Start-Ups. Venture Capital, 11, 295-309.
https://doi.org/10.1080/13691060903184803

[65]   Greenhalgh, C., Rogers, M. and Helmers, C. (2007) An Analysis of the Association between the Use of Intellectual Property by UK SMEs and Subsequent Performance. Working Paper.
https://www.researchgate.net/publication/228472779_An_analysis_of_the_association_between_the_use_of_intellectual_property_by_UK_SMEs_and_subsequent_performance

[66]   Austin, D.H. (1993) An Event-Study Approach to Measuring Innovative Output: The Case of Biotechnology. American Economic Review, 83, 253-258.

[67]   Wooldridge, J. (2011) Introductory Econometrics. South-Western, Mason.

 
 
Top