Supply and demand determinants of startup patents

This paper estimates simultaneously the supply and demand determinants of patent adoption by start-ups. It uses a partial observability bivariate probit model because the non-adoption outcome of the patent decision is unobserved. Econometric estimation of this model is undertaken on Kauffman Foundation start-up data, using a large representative unbalanced panel, collected by web survey and telephone interviews. This model is found to be robust. It challenges the view that patenting is either exclusively demand-side or supply-side determined. Instead, it provides a good joint explanation of supply and demand determinants of patent adoption in startups, emphasising the importance of sectoral choice, R&D spend, and competitive advantage on the supply-side; and complementary IP (e.g., trademarks, licensing-out), and venture capital, on the demand-side. Brief policy implications are drawn out.