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Intellectual Property Rights and the Financing of Technological Innovation

Public Policy and the Efficiency of Capital Markets

  • New Horizons in Intellectual Property series

Carl Benedikt Frey

Following the transition of industrial nations to knowledge economies, the financing of technological innovation has become a central issue in public policy, corporate finance and business management. This detailed book examines the role of intellectual property rights in facilitating the financing of technological innovation as well as the role of policy makers, investors and managers in this process. The book’s central finding is that public policy plays a key role in promoting the corporate disclosure of intellectual property-related information to enhance the efficiency of capital markets. This not only reduces the costs of capital for technology-driven firms but ultimately spurs innovation and economic growth.
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Chapter 2: The intangible economy

Carl Benedikt Frey


This chapter reviews the literature in relation to the intangible economy – a term I use to describe the paradigm shift towards an economy in which growth is primarily driven by technological innovation. In doing so, the chapter touches upon several aspects of the economy – notably managerial and capital market-related implications – which I intend to bring together. This is because the problems of measurement and valuation that stem from the intangible economy, I argue, are best solved by: (a) creating an understanding of its managerial implications among investors, so that they request value-relevant information for consideration in their investment analysis; (b) creating incentives for managers to disclose such information by gaining knowledge about informational deficits in capital markets and their implications for corporate finance.

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