School of Accounting, Guangdong University of Foreign Studies; School of Management, Xiamen University; Business School, Sun Yat-Sen University, Sun Yat-Sen University·Shenzhen Research Center for Innovation, Entrepreneurship and Technology Finance
Summary:
Innovation is a core element in the development of new quality productivity. However, innovative projects themselves have a large capital demand. Moreover, the high confidentiality of innovation projects leads to high information asymmetry. All these make enterprises' innovation endeavors to intense external finance pressure. In China, bank loans remain the main source of external financing for most companies. Therefore, innovative enterprises face a dual-pronged dilemma in debt financing. On one hand, due to the high information asymmetry of innovation projects and the lack of the right for banks to share the benefits of innovation projects, innovation-oriented enterprises face certain loan discrimination; On the other hand, the proportion of tangible assets of innovative enterprises is limited, and intangible assets such as patents are difficult to mortgage or quickly liquidate, making it difficult to obtain direct financing. Patent collateral loans are a novel bank financing method to meet the capital demand of enterprises with high proportion of digital assets in the digital economy era. However, there is still a lack of evidence on the effectiveness of patent collateral loans.
Theoretically patent collateral loans can alleviate financing constraints through three aspects and boost enterprise innovation output. First,enterprises can obtain bank loans by using patents as collateral, alleviating the pressure of external finance and providing support for their continuous innovation activities. Second, the strict requirements of banks for patents as collateral prior to lending, and the fact that the funds from patent collateral loans are mainly used for project loans can effectively enhance the operational capacity of enterprises, mitigate the risk of venture capital investment failure, thus guiding venture capital and attracting more venture capital to enter enterprises. Finally, by disclosing information related to patent collateral contracts, enterprises can send positive signals, such as having high-quality patents and innovative projects, which is conducive to enterprises obtaining various credit resources support from other banks.However, the innovation incentive effect of patent collateral loans depends on the a favorable external environment.Therefore, this paper focuses on whether patent collateral loans effectively stimulate innovation output.
This paper manually collects patent collateral loans of China A-share listed companies from 2008 to 2020, employs the PSM-DiD method to study the impact of patent collateral loans on innovation and its influencing mechanism. Patent collateral loans can bring direct financial support, exert guiding and signaling roles, attract venture capital and bring support of various credit resources provided by other banks, and ultimately alleviate financing constraints and promote enterprise innovation, that is, there exists an innovation-incentive effect. Heterogeneity analysis shows that the incentive effect of patent collateral loans is more obvious in private enterprises with financing bottlenecks, small enterprises, science and technology enterprises and competitive industries with high proprietary costs. From the perspective of banks, the incentive effect of patent collateral loans provided by systemically important banks is significantly better than that from non-systemically important banks. Finally, the innovation incentive effect of patent collateral loans can promote firm performance.
This study makes possible contributions to the following aspects: First,it theoretically explores how patents, as legal constructs, can be transformed into enterprises' financial resources. By examining the incentive effect of this innovative loan-patent collateral loans - on innovation output, it provides a new analytical perspective for understanding the integration mechanism of the digital economy and the financial economy. Second, it enriches the signaling theory and screening theory in existing financial economics, explores how patents, as an important signaling mechanism, affect the allocation of credit resources, and how the screening mechanism of banks for patents' valuation attracts venture capital, and analyzes the impact of patent collateral loans on innovation and the micro-mechanism from a micro- perspective. Third, this paper also supplements the economic growth theory by linking patent collateral loans with enterprises' innovation behavior, and emphasizes the role of financing in fostering innovation. Meanwhile, this paper conducts an analysis of patent collateral loans and explores the relationship between innovation incentives and financial returns. These results show that the incentive effect of patent collateral loans is more obvious in private enterprises, small - scale enterprises, technology-based enterprises with financing bottlenecks and in competitive industries with high proprietary costs; the incentive effect of patent collateral loans provided by systemically important banks is significantly better than that of non-systemically important banks. These findings can inspire enterprises to focus on developing high quality and economically valuable patents.
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