Intellectual Property Rights and the Financing of Technological Innovation
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Intellectual Property Rights and the Financing of Technological Innovation

Public Policy and the Efficiency of Capital Markets

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 5: IPR management, corporate disclosures, and stock market valuations in the pharmaceutical industry

Public Policy and the Efficiency of Capital Markets

Carl Benedikt Frey


The exploratory study in Chapter 4 set out how pharmaceutical firms conduct their IPR management, and its association with their financial performance. Taking these findings, together with past research showing that IPR contribute to both firm productivity and market values (see Section 2.4), as well as research pointing to the ability of companies to reduce asymmetric information, and thereby also stock market uncertainty (see Section 2.8.3), through voluntary IPR reporting, it seems reasonable to assume that information on firms’ IPR management is value-relevant – that is, under the assumption of informationally efficient stock markets, it should be reflected in share prices. In this chapter, the assumption of informational market efficiency is examined in relation to the relationships identified between IPR management and firms’ financial performance (see Section 4.6). These relationships are operationalised as in Figure 5.1, and examined accordingly. Secondly, previous studies as well as the exploratory interviews reveal that some firms report on their IPR management on a voluntary basis (see Section 4.7).

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