Cash Breeds Success: The Role of Financing Constraints in Patent Races*

Schroth, Enrique; Szalay, Dezsö

doi:10.1093/rof/rfp020

Cited by 72 publications

(28 citation statements)

References 27 publications

(9 reference statements)

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“…As a result, Panels A and B of Figure 2 together demonstrate that in addition to the asymmetric investment costs, the asymmetric financing capacities between the two suppliers crucially impact the roles of leader and follower and their optimal investment timing decisions. This result complements the findings of Haushalter et al (2008), Fresard (2010), and Schroth and Szalay (2010).…”

Section: The Effects Of Asymmetric Financing Capacities and Investmensupporting

confidence: 89%

Asymmetric Suppliers’ Optimal Investment Timing Decisions

Kumar¹

2019

EJBE

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This paper extends Boyle and Guthrie (2003) to investigate the interdependent effects of asymmetric financing capacities and investment costs on investment timing decisions in a duopoly with a first-mover advantage. We demonstrate several novel findings. First, suffering a significant cost disadvantage, the supplier with a larger financing capacity can still be the leader when the risk of future funding shortfalls is relatively high. Second, a weaker supplier with a significant lower financing capacity and a small cost disadvantage can even be the leader under some degree of the risk of future funding shortfalls. In addition, the weaker supplier that is still more liquidity constrained cannot be the leader anymore as its financing capacity improves and closes to that of the rival. Third, only when the risk of future funding shortfalls is relatively low, small asymmetry of investment costs can make the rival's preemption threat effective. Finally, higher project return volatility can lead to a change of the supplier's role from a follower to a leader under some degree of the risk of future funding shortfalls, thereby lowering the supplier's optimal investment trigger.

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Section: The Effects Of Asymmetric Financing Capacities and Investmensupporting

confidence: 89%

Asymmetric Suppliers’ Optimal Investment Timing Decisions

Kumar¹

2019

EJBE

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“…In their working paper, Cohen and Ishii (2006) study patent races and the role of incumbents to delay information therein. In contrast to the study from Schroth and Szalay (2010), they found an elegant solution to identify patent races, deriving race-like situations from US patent interference cases. Such cases originate in the first-to-invent system where the date of the invention, not the filing date as in many other jurisdictions, is relevant for assigning priority to an invention.…”

Section: Patent Race Modelsmentioning

confidence: 90%

“…Only two papers could be identified that explicitly studied patent race-like behavior. Schroth and Szalay (2010) looked at patenting of US firms, attempting to show that financial means have a positive impact on winning a race, which is frequently assumed in the theoretical literature (see e.g. De Fraja 1993).…”

Section: Patent Race Modelsmentioning

confidence: 99%

“…De Fraja 1993). More specifically, Schroth and Szalay (2010) assume that all those firms participated in a race which patents' have been the most highly cited in the race-winning patent. Given the coarse nature of US patent citations (Michel and Bettels 2001), one must be very cautious in assuming that firms which have been highly cited were also working on filing the same invention.…”

Section: Patent Race Modelsmentioning

confidence: 99%

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Patent race-like competition in drug lifecycle management (WITHDRAWN)

Sternitzke

2013

AMPROC

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In patent races, competing firms conduct R&D and file patents in order to hinder market entry by competitors. Despite a vast body of theoretical work on patent races, there is a lack of empirical evidence. This paper makes a first attempt to identify patent races in pharmaceuticals. The dataset relies on drug lifecycle management activities within a class of drugs where firms strive to expand patent protection into niche markets by filing additional indications for their substances. Therefore, the competitive dynamics of filing such additional indications were studied. Although some cases could be found were firms were neck-and-neck (as proposed in the theoretical literature), the patents coming first did not no prevent granting of the later patents. The results contribute to both the literature on patent races and optimal patent breadth.

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“…Indeed, there are many influential complementary papers examining other motives for holding liquidities. For example, Armenter and Hnatkovska (2011) focus on the role of taxation, Lyandres and Palazzo (2014) and Schroth and Szalay (2010) examine the role of R&D intensity and competition, and Nikolov and Whited (2014) quantify agency conflicts in understanding cash accumulation behavior. 7 Others focus on the relationship with financial constraints, including Acharya et al (2007), Almeida et al (2004), Bolton et al (2011), Han and Qiu (2007), Hugonnier et al (2015), Morellec et al (2014), and Riddick and Whited (2009).…”

Section: Introductionmentioning

confidence: 99%

Corporate Cash Holdings and Credit Line Usage

Boileau¹,

Moyen²

2016

Int Economic Review

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We investigate the factors driving the unprecedented rise in corporate liquidities since the 1970s. We find that an economy‐wide reduction in the cost of holding liquidities and an increase in risk best explain the rise in cash holdings and the widespread use of credit lines. The structural estimation results shed light on two widely acknowledged motives for holding cash. The precautionary motive and the liquidity motive translate risk exposure into cash holdings. Our results, however, do not suggest that firms have become more prudent over time. It is higher liquidity needs that has forced firms to hold more cash and use more credit lines.

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Cash Breeds Success: The Role of Financing Constraints in Patent Races*

Cited by 72 publications

References 27 publications

Asymmetric Suppliers’ Optimal Investment Timing Decisions

Asymmetric Suppliers’ Optimal Investment Timing Decisions

Patent race-like competition in drug lifecycle management (WITHDRAWN)

Corporate Cash Holdings and Credit Line Usage

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