Is innovation driven by investment?

Do public companies with external backers register more patents and also receive more citations?

Does the ownership model of a company decide how creative or original it will be with its ideas and, hence, patents? Researchers Viral V Acharya and Zhaoxia Xu set out to find proof and discovered that in comparison with privately-held firms, public companies with external backers on an average not just register more patents but also receive many more citations for the same. Also, these patents tend to be more in number and much more original when compared with the ones registered by their private counterparts. Having said that, the researchers caution that in cases where the public company has internal backers, this gap is somewhat bridged to match the innovative happenings at private companies.

Title: Financial Dependence and Innovation: The Case of Public versus Private Firms

Source: The National Bureau of Economic Research


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