Patent Success, Patent Holdup, and the Structure of Property Rights

54 Pages Posted: 20 Sep 2015 Last revised: 11 Jun 2020

See all articles by Heng Geng

Heng Geng

Victoria University of Wellington

Harald Hau

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Sandy Lai

University of Hong Kong

Multiple version iconThere are 2 versions of this paper

Date Written: September 17, 2015

Abstract

When innovation is cumulative, patent protection on early inventions can generate holdup problems if later complementary patents are owned by different firms. Consistent with the property rights literature, we show that shareholder ownership overlap across firms with patent complementarities helps mitigate such holdup problems and correlates significantly with higher R&D investment, more patent success, and lower patent infringement litigation risk for firms with follow-on innovations. The positive innovation effect is strongest for concentrated overlapping ownership and for the cases in which overlapping shareholders are dedicated investors, with long investment horizons and underdiversified portfolios.

Keywords: Patents, Holdup Problems, Innovation, Institutional Ownership

JEL Classification: L22, G31, G32

Suggested Citation

Geng, Heng and Hau, Harald and Lai, Sandy, Patent Success, Patent Holdup, and the Structure of Property Rights (September 17, 2015). Swiss Finance Institute Research Paper No. 15-39, Available at SSRN: https://ssrn.com/abstract=2662478 or http://dx.doi.org/10.2139/ssrn.2662478

Heng Geng

Victoria University of Wellington ( email )

PO Box 600
Wellington, 6140
New Zealand

Harald Hau (Contact Author)

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland

Swiss Finance Institute

Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Sandy Lai

University of Hong Kong ( email )

Faculty of Business and Economics
K.K. Leung Building, Pokfulam Road
Hong Kong, Pokfulam HK
Hong Kong

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