{'fraction_non_alphanumeric': 0.01628052598622417, 'fraction_numerical': 0.0068879148403256105, 'mean_word_length': 5.053030303030303, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 0, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
The effect of patent protection on the timing of alliance entry

This paper analyzes how a start-up biotech firm’s patent rights affect if and when it enters into an alliance with a pharmaceutical firm. The existing literature presents conflicting predictions of how obtaining patent rights affects alliance entry. The literature on markets for technology argues that obtaining patents increases the firm’s protection during pre-contractual negotiations, hence increasing the likelihood of alliance entry. However, research in finance suggests that obtaining patents also increases the ability to access outside funding, which in turn enables the firm to delay entry into an alliance with a pharmaceutical firm. Using a dataset comprising information on 650 U.S. biotech firms founded over the period 1976-2002, I estimate the effect of a firm’s patent protection on the hazard of it entering into an alliance with a pharmaceutical firm. I find that while the likelihood of a firm entering into an alliance increases with the firm’s patent filings, it decreases as those patents issue. This result is robust to different methods of dating the patent filing, as well as to weighting the patent count by both the number of forward citations and a more general index of patent quality. This suggests that, while filing patents over the technology enables the biotech firm to transact with a pharmaceutical firm, the issue of those patents increases the biotech firm’s outside options and hence enables it to delay the timing of alliance entry until the optimal stage in the commercialization process.