Patents and the Success of Venture-Capital Backed Startups

Patrick Gaule (CERGE-EI), “Patents and the Success of Venture-Capital Backed Startups: Using Examiner Assignment to Estimate Causal Effects”

I study whether patent protection has a causal effect on entrepreneurial firm outcomes using a measure of patent examiner leniency as an instrument for getting patents. The analysis is based on sample of 2,191 U.S. startups applying for patent protection in the two years following their first round of venture capital funding. I find a positive and large effect of patents on firm success but only for life science firms and more important inventions. I interpret these results as reflecting the effectiveness of patents in appropriating returns to invention.