The Private Value of Patents for Government-supported Start-Ups: The Case of the European Investment Fund

Abstract

The creation of value through innovation is among the defining traits of new technology-driven ventures. In this context, patents are an important signalling device to attract external financing. In this paper we contribute to the literature by investigating the value of innovations for start-ups supported by the European Investment Fund (EIF), through its venture capital (VC) instruments, in the years 1996–2014. The value of innovations is measured through patent applications and renewals. We employ an established econometric model to estimate the euro value of innovations based on patent renewal decisions. We find that start-ups in the life sciences hold, on average, the most valuable innovations. At the same time, we find compelling evidence that selection bias, causing less promising inventions to be excluded a priori from patenting, is pervasive across industries and/or regions of Europe. Implications for policy and research are discussed.