Publications
Publications
- 2017
The Need for Speed: Effects of Uncertainty Reduction in Patenting
By: Mike Horia Teodorescu
Abstract
Patents are essential in commerce to establish property rights for ideas and to give equal protection to firms that develop new technologies. Young firms especially depend on the protection of intellectual property to bring a product from concept to market. However, the market for technology ideas has been recognized as an inefficient market in the management and economics literatures. While information asymmetry and expropriation risks have been studied extensively, the question of the effects of pre-patent grant uncertainty on firm outcomes remains open. This paper introduces a novel analysis based on internal US Patent and Trademark Office databases, exploiting an exogenous shock to startup firms from a previously unstudied executive action involving reduction of patent pendency (time from application to patent decision) for green technology patents. The aim of the paper is to determine whether reduced patent pendency improves firm outcomes for startups and to explore its implications. The findings are that treated startups (with accelerated patenting) have increased sales (by 30%), greatly increased venture funding (50%) and increased employment (over 25%). The paper also introduces a novel method for constructing a control group using a classification algorithm rooted in natural language processing, which can be used in conjunction with traditional econometric approaches such as difference-in-differences analysis beyond the topic of this paper.
Keywords
Startups; Natural Language Processing; Machine Learning; Patents; Business Startups; Risk and Uncertainty; Outcome or Result; Green Technology Industry
Citation
Teodorescu, Mike Horia. "The Need for Speed: Effects of Uncertainty Reduction in Patenting." Working Paper, September 2017. (Job Market Paper.)