Leveraging Intellectual Property : The Value of Harmonized Enforcement Regimes

We provide new evidence on how intellectual property (IP) rights support external debt financing by investigating exogenous variation in patent right enforcement. Deploying a unique, large-scale sample of European firms, we exploit the 2004 EU Enforcement Directive, a major legislative change strengthening IP rights across Europe, as identifying event. Results show that firms with valuable patent portfolios disproportionally increase debt financing by about 21%. Effects are particularly pronounced for private SMEs, ex-ante financially constrained firms, and in competitive environments. Adding previously undisclosed patent collateral information provides suggestive evidence that enhanced IP enforcement benefits debt financing beyond a mere collateral channel