Using a unique database on Swedish patents owned by small ﬁrms and individuals, survival models estimate how different factors inﬂuence the decision to commercialize the patents. Such an analysis has seemingly never previously been undertaken. Since the owners know more about the patents than potential external ﬁnanciers, problems related to asymmetrical information are present. To overcome these problems when inventors and small technology-based ﬁrms need ﬁnancing, Sweden has for a long time relied on government support rather than private venture capital ﬁrms. The empirical results show that the larger is the share of patent-owners’ costs covered by government ﬁnancial support during the R&D phase, the lower is the probability of patents being commercialized. This lower degree of commercialization is likely to depend on (1) the soft terms of the government loans, where the patent owner can avoid paying back the loan if the patent is never commercialized and/or (2) that the government is not able to select promising projects. The ﬁrst explanation is related to moral hazard and the second one to adverse selection. The policy suggestion is for government to change the design of the loans, to base them on ﬁrms rather than projects.
Commercialization of Patents and External Financing During the R&D Phase
Scientific Article in English