Patents as Collateral

This paper studies how the assignment of patents as collateral determines the savings of fi rms and magni fies the effect of innovative rents on investment in research and development (R&D). We analyse the behaviour of innovative fi rms that face random and lumpy investment opportunities in R&D. High growth rates of innovations, possibly higher than the real rate of interest, may be achieved despite fi nancial constraints. There is an optimal level of publicly funded policy by the patent and trademark office that minimizes the legal uncertainty surrounding patents as collateral and maximizes the growth rate of innovations