Working papers

Property Rights and Debt Financing [link will be updated]

I examine how increasing firms' ownership of employee patents affects debt financing. I exploit a Court of Appeals Federal Circuit ruling that shifted the patent ownership structure under invention assignment agreements and increased firms' property rights to employee patents. I find that the firm ownership of patents increases firms' total debt-to-assets ratio by 18%. Patent ownership is important because it helps reduce holdup problems and enhance complementarity in underlying innovation processes by increasing firms' incentives to make more productive and synergistic use of patents. This, in turn, improves pledgeability of patents as collateral and facilitates debt financing for knowledge-intensive firms.

Inter-firm Patent Litigation and Innovation Competition (with Jongsub Lee and Seungjoon Oh)

Using novel inter-rm patent litigation data, we show that patent litigation has significant financial and real impacts; defendant firms become financially constrained, reduce innovation activity, and concomitantly shift toward more narrow-scoped innovations to reduce litigation risk. We also find significant litigation risk spillover to other non-litigated firms in the same industry. The product market overlap between defendants and plaintiffs exacerbates these financial and real consequences of patent litigation, indicating a significant interplay between intellectual property rights boundaries and product market dynamics. Using China's participation in Trade-Related Aspects of Intellectual Property Rights Agreement as an instrument, we alleviate potential endogeneity concerns.