Publications
Publications
- 2021
- HBS Working Paper Series
How Resilient Is Venture-Backed Innovation? Evidence from Four Decades of U.S. Patenting
By: Sabrina T. Howell, Josh Lerner, Ramana Nanda and Richard Townsend
Abstract
By comparing patenting among VC-backed firms to the universe of U.S. patents over the period 1976–2019, we document that while patents filed by VC-backed firms are of significantly higher quality and economic importance than the average patent, VC-backed innovation is substantially more procyclical than innovation in the broader economy. This is driven by early-stage startups, whose innovation in recessions is relatively less cited, less original, less general, and less related to fundamental science. Our findings are most consistent with frictions in capital supply playing an important role, leading VCs to change their investment focus during downturns towards less innovative startups.
Keywords
Recessions; Venture Capital; Innovation and Invention; Patents; Business Cycles; Economic Slowdown and Stagnation
Citation
Howell, Sabrina T., Josh Lerner, Ramana Nanda, and Richard Townsend. "How Resilient Is Venture-Backed Innovation? Evidence from Four Decades of U.S. Patenting." Harvard Business School Working Paper, No. 20-115, May 2020. (Revised January 2021.)