When patents become collateral: Intellectual property financialization and corporate venture capital investment

Abstract

This paper examines whether patent-backed financing reforms affect firms’ external technology acquisition strategies. Using the staggered rollout of China’s Patent Pledge Financing Pilot (PPFP) across cities, we employ a difference-in-differences design to study its effect on corporate venture capital (CVC) investment. We find that PPFP significantly increases firms’ CVC activity, with the effect concentrated in high-tech CVC, and weaker for state-owned enterprises. These findings are consistent with the view that increasing the financial value of patent assets strengthens firms’ incentives to engage in technology-oriented CVC for external technology sourcing.