We model patent-signaling by informed venture capitalists to incumbent acquirers of developed innovations. We show that, to signal, venture capitalists develop more patents with higher impact than incumbents would. A tightening of patenting requirements by the patent offices, such as an increase in the required inventive step, increases the pool of unprotected early-stage ideas, which venture capitalists are better at judging than incumbents, and decreases the number and breadth of patented claims needed to s… Show more
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