Dynamics of First-Time Patenting Firms

This paper investigates the dynamics of young firms in the period before and after their first-time patent application. The analysis is based on patent data from the Norwegian Industrial Property Office merged with data from several business registers covering a period of almost 20 years. We apply an event study design to estimate short- and long-term effects of patenting and use matching to control for confounding factors. The first patent application by a young firm is associated with significant growth in employment, output, assets and public research funding. Moreover, our results indicate that economic activity starts to increase at least three years ahead of the first patent application and remains at the higher level in the sub-sequent years. Our findings indicate that the patenting system promotes firms’ innovation activities, particularly in the early phase of their life cycle