Patents, Trademarks, and Their Complementarity in Venture Capital Funding
31 Pages Posted: 6 Dec 2015
Date Written: November 28, 2015
This paper analyzes the effects of patents and trademarks in the financing of start-ups through venture capitalists (VCs). Patents and trademarks signal a start-up’s technological and marketing capabilities. We find that patents and trademarks not only have direct effects on venture capital financing but also have complementary effects. Start-ups that apply for both patents and trademarks yield higher VC funding than do those firms that apply for only one of the two IP rights. Furthermore, we find that the complementarity between patents and trademarks exists only in initial VC funding rounds. Our results suggest that early-phase start-ups seeking their initial VC funding do best when stressing both their technology and marketing capabilities. Accordingly, entrepreneurship policy should encourage start-ups to build both technological and marketing capabilities.
Keywords: patents, trademarks, complementarity between patents and trademarks, venture capital funding
JEL Classification: L26, M31, O34
Suggested Citation: Suggested Citation