Abstract
This study examines the types of patents that tend to be used as collateral for loans. We argue that a patent’s backward citations, based upon which the patent is developed, can provide critical informational cues for lenders to assess the extent to which the patent is redeployable to alternative users and accordingly its liquidity in the market for technology. More specifically, we propose that a high ratio of self-citations means that the patent is specific to the patent owner and less redeployable to alternative users. Citations of other firms’ patents (i.e., other citations) are not equal, varying along industry, geography, and temporal dimensions. Among other citations, a high ratio of within-industry citations and domestic citations suggests that the patent is more redeployable to alternative users competing in the same industry and/or in the same country. Patents that cite newer patents of other firms are closely related to activities other firms are currently engaged in and are thus also more redeployable to alternative users. Results with data on U.S. patents in the semiconductor industry support these hypotheses.
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