Patents as Collateral

Chatelain, Jean-Bernard and Ralf, Kirsten and Bruno, Amable (2010): Patents as Collateral. Published in: Journal of Economic Dynamics & Control , Vol. 34, (2010): pp. 1092-1104.

Abstract

This paper studies how the assignment of patents as collateral determines the savings of firms and magnifies the effect of innovative rents on investment in research and development (R&D). We analyse the behaviour of innovative firms that face random and lumpy investment opportunities in R&D. High growth rates of innovations, possibly higher than the real rate of interest, may be achieved despite financial constraints. There is an optimal level of publicly funded policy by the patent and trademark office that minimizes the legal uncertainty surrounding patents as collateral and maximizes the growth rate of innovations.

• Item Type: MPRA Paper
• Language: English
• Keywords: Collateral, Patents, Research and Development, Credit rationing, Growth, Innovation.
• Subjects: D - Microeconomics > D9 - Intertemporal Choice > D92 - Intertemporal Firm Choice, Investment, Capacity, and Financing; G - Financial Economics > G2 - Financial Institutions and Services; G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking ; Venture Capital ; Brokerage ; Ratings and Ratings Agencies; G - Financial Economics > G3 - Corporate Finance and Governance; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

References

Aghion, P., Askenazy, P., Berman, N., Cette, G., Eymard, L., 2007. Credit constraints and the cyclicality of R&D investment: evidence from France. mimeo. Harvard University.

Amable, B., Chatelain, J.-B., 1995. Systèmes financiers et croissance: les effets du "court-termisme". Revue Economique, 46(3), 827-836

Amable, B., Chatelain, J.-B., Ralf, K., 2004. Credit rationing, profit accumulation and economic growth. Economics Letters 85, 301-307.</topic>

Araujo, A., Pascoa, M.R., Torres-Martinez, P., 2002. Collateral avoids Ponzi schemes in incomplete markets. Econometrica 70, 1613-1637.

Barro, R., Sala-I-Martin, X., 2004. Economic Growth, second ed. MIT Press, Cambridge (Mass).

Bertola, G., Foellmi, R., Zweimüller, J., 2006. Income Distribution in Macroeconomic Models. Princeton University Press;, Princeton.

Blundell, R., Griffith, R., Van Reenen, J., 1999. Market share, market value and innovation in a panel of British manufacturing firms. Review of Economic Studies 66, 529-554.

Boucekkine, R., de la Croix, D., 2003. Information technologies, embodiment and growth. Journal of Economic Dynamics and Control 11-12, 2007-2034.

Bougheas, S., Mizen, P., Yalcin, C., 2006. Access to external finance: Theory and evidence on the impact of monetary policy and firm-specific characteristics. Journal of Banking and Finance 1, 199-227.

Caggese, A., 2007. Financing constraints, irreversibility, and investment dynamics. Journal of Monetary Economics 54, 2102-2130.

Chatelain, J.-B., 2000. Explicit Lagrange multiplier for firms facing a debt ceiling constraint. Economics Letters 67, 153-158.

Chatelain, J.-B., 2001. Mark-up and capital structure of the firm facing uncertainty. Economics Letters 74, 99-105.

Chow, G.C., 1997. Dynamic Economics. Oxford University Press.

Cordoba, J.C., Ripoll, M., 2004. Credit Cycles Redux. International Economic Review 45, 1011-1046.

Corrado, C. A., Hulten, C. R., Sichel, D. E., 2006, Intangible capital and economic growth, NBER Working Paper No. 11948, NBER, Cambridge, MA.

Donoghue, T., Zweimüller, J., 2004. Patents in a Model of Endogenous Growth. Journal of Economic Growth 9, 81-123.

Edwards D., 2002. Patent backed securitization: blueprint for a new asset class <http://www.securitization.net/pdf/gerling_new_0302.pdf>.

Faia, E., Monacelli, T., 2007. Optimal interest rate rules, asset prices, and credit frictions. Journal of Economic Dynamics and Control 31, 3228-3254.

Furukawa, Y., 2007. The protection of intellectual property rights and endogenous growth: Is stronger always better? Journal of Economic Dynamics and Control 31, 3644-3670.

Gancia, G., Zilibotti, F., 2005. Endogenous Growth with Product Variety, in: Aghion, P. and Durlauf, S. (eds.). The Handbook of Economic Growth. North-Holland.

Geroski, P., Van Reenen, J., Walters, C.F., 1997. How persistently do firms innovate? Research Policy 26, 33-48.

Gertler, M., Gilchrist, S., Natalucci, F.M., 2007. External Constraints on Monetary Policy and the Financial Accelerator. Journal of Money, Credit and Banking 39, 295-330.

Grossman, G.M., Helpman, E., 1991. Innovation and Growth in the Global Economy. The MIT Press, Cambridge, MA.

Hall, B.H., 2002. The Financing of Research and Development. Oxford Review of Economic Policy 18, 35-51.

Iacoviello, M., 2005. House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle. American Economic Review 95, 739-764.

Kamiyama, S., Sheehan, J., Martinez, C., 2006, Valuation and exploitation of intellectual property, OECD Science, Technology and Industry Working Papers, 2006/5, OECD Publishing.

Kato, R., 2006. Liquidity, infinite horizons and macroeconomic fluctuations. European Economic Review 50, 1105-1130.

Keuschnigg, C., 2004. Venture Capital Backed Growth. Journal of Economic Growth 9, 239-261.

Kiyotaki, N., Moore, J., 1997. Credit Cycles. Journal of Political Economy 105, 211-248.

Kiyotaki, N., 1998. Credit and Business Cycles, Japanese Economic Review 49, 18-35.

Kunieda, T., Shibata, A., 2005. Credit constraints and the current account: A test for the Japanese economy. Journal of International Money and Finance 24, 1261-1277.

Kwan, F.Y.K, Lai, E.L.C., 2003. Intellectual Property Rights Protection and Endogenous Economic Growth. Journal of Economic Dynamics and Control 27, 853-873.

Moretto, M., Tamborini, R., 2007. Firm value, illiquidity risk and liquidity insurance. Journal of Banking and Finance 31, 103-120.

Murphy, W.J., 2002. A proposal for a centralized and integrated registry for security interests in intellectual property. IDEA The Journal of Law and Technology. Franklin Pierce Law Centre, Concord, USA 41, 297-601 (41 IDEA 297).

Rivera-Batiz, L., Romer, P., 1991. Economic Integration and Endogenous Growth. Quarterly Journal of Economics 106, 531-55.

Romer, P., 1990. Endogenous Technological Change. Journal of Political Economy 98, S71- S102.

Serrano, C.J., 2008. The dynamics of the transfer and renewal of patents. NBER working paper.

Schavey, R.D., 2003. Security Interest in Patents and Trademarks. Mayer, Brown, Rowe and Maw LLP Publication, http://www.securitization.net/pdf/Ruff \_chavey$\$_security$\$_interests.pdf.

Strulik, H., 2007. Too much of a good thing? The quantitative economics of R&D Driven Growth revisited. Scandinavian Journal of Economics 109, 369-386.

Sveen, T., Weinke L., 2007. Lumpy investment, sticky prices, and the monetary transmission mechanism. Journal of Monetary Economics 54, 23-36.