Essays on Innovation and Corporate Finance

This dissertation consists of two essays lying into the intersection of innovation and corporate finance. The first essay, included in Chapter 2, is “Asymmetric Information, Patent Publication, and Inventor Human Capital Reallocation”. I empirically study whether and how patent publication affects inventor human capital reallocation. Leveraging (i) the American Inventor’s Protection Act (AIPA) that requires patent applications to be published within 18 months of filing rather than when granted, (ii) plausible quasi-random assignment of patent examiners, and (iii) a large dataset tracking inventors’ career paths, I adopt a difference-in-differences design and show that the expedited patent publication helps inventors switch employers. Additional analyses suggest that increased mobility is driven by expanded outside employers’ information and reduced information asymmetry: the effect is more pronounced among inventors of high-quality, with scarcer existing information, or in technologies where patents are more informative. I provide suggestive evidence that indicates a positive effect on enhancing inventor-firm matching and increased patenting output. This study highlights an important yet overlooked facet of patent publication: inventor human capital reallocation. The second essay, included in Chapter 3, is “The Spillover Effects of Patent Litigation: Evidence from the Quasi-random Assignment of Patent Examiners”. It is a joint work with Julian Atanassov and Vikram Nanda. The increasingly fragmented ownership of intellectual property implies that patent lawsuits will have spillover effects well beyond litigated patents and firms. In this study, we examine the spillover effects of patent litigation on follow-on innovation, firm valuation, and inventor human capital flows. Using quasi-random assignment of patent examiners and a novel measure of citation-quality, we confirm findings in extant literature that litigated patents receive more subsequent citations but show that those citations are of lower quality. Further, technologically related patents suffer significant declines in quantity and citation-quality, suggesting a negative overall effect of weaker property rights on follow-on innovation. In addition, firms that are technologically close to litigant-firms, reduce R&D expenditure, lose inventors, and suffer significant declines in the quantity and quality of innovation and firm value. Product-market rivals with unrelated technologies are beneficiaries. Overall, our evidence highlights that accounting for spillover effects, patent lawsuits are far more pernicious to innovative activity than previously recognized.