+10% pre-investment patenting = 3.57% increase in post-investment patenting

+10% pre-investment trade marking = 3.97% increase in post-investment trade marking

Financial resources are critical in fostering innovation and brand protection. Larger investments provide the necessary capital for companies to pursue extensive IP protection, facilitating the development and safeguarding of new technologies and brands.

Table 3 presents the results of the linear regression model reflecting how private equity’s financial backing at various stages of a company’s development influences its engagement in securing IP rights, which are crucial for competitive advantage and market positioning. The dependent variable is the natural logarithm of the number of intellectual property rights filed by private equity and venture capital portfolio companies, these being either patents or trade marks. The main independent variables are the natural logarithm of the amounts invested by firms into the portfolio companies, and the prior patenting activity of the portfolio companies before investment. Control variables are used for the companies’ respective countries and sectors (the corresponding coefficients have no intrinsic interest and are therefore omitted in the tables).

The coefficients in Table 3 can be interpreted as the elasticity of IPR activity under private equity and venture capital, representing the percentage change in IPR activity resulting from a 1% change in the independent variables. The first column shows that an increase in the amount invested was associated with a significant rise in patenting. Specifically, a 10% increase in investment, (in thousands of euros), correlated with a 0.09% increase in post-investment patenting activity. This relationship was found to be statistically significant at the 1% level, affirming the role that investment plays in stimulating patenting activity.

Additionally, prior patenting activity, measured by ‘Previous Patent stock (logged)’, had a significant positive effect on post-investment patenting. A 10% increase in pre-investment patenting activity led to an estimated 3.57% increase in post-investment patenting, reinforcing the notion that companies already actively patenting before investment are more likely to continue or increase their patenting efforts afterward.

The second column focuses on the impact of investment on trade marking activity (‘Subsequent trade mark stock (logged)’). Here, a 10% increase in the amount invested resulted in a 0.20% increase in post-investment trade marking activity. This coefficient was statistically significant at the 1% level, highlighting that investment is a driver of trade marking as well.

Furthermore, historical trade marking activity (‘Previous trade mark stock (logged)’) exhibited a significant positive relationship with post-investment trade marking. A 10% increase in pre-investment trade marking activity predicted a 3.97% rise in post-investment trade marking. This finding demonstrates that companies with established trade mark portfolios before investment tend to expand those portfolios after receiving investment.

Both models suggest that companies that receive more significant investments tend to increase their patenting and trade marking activities. Furthermore, those with a history of actively managing their intellectual property portfolios are more likely to continue these activities following additional investment, emphasising the cumulative nature of intellectual property management.

The relationship between the amount invested and subsequent IPR activity underscores the importance of financial resources in fostering innovation and brand protection. Larger investments provide the necessary capital for companies to pursue extensive IP protection, facilitating the development and safeguarding of new technologies and brands. This dynamic illustrates how financial backing from private equity and venture capital can directly enhance a company's competitive positioning by enabling a more robust and proactive approach to intellectual property management.

Zooming in on the results related to venture-stage companies only, a 10% increase in investment amounts correlated with a 0.14% increase in post-investment patenting activity, significant at the 1% level. Prior patenting activity proved to significantly influence post-investment patenting, with a 10% increase in pre-investment patenting activity leading to an estimated 3.41% increase in post-investment, reinforcing the notion that even at the earliest stage of companies’ lives, companies already actively patenting before investment are more likely to continue or increase their patenting efforts afterwards.

When it comes to trade marking, a 10% increase in the amounts invested by private equity and venture capital funds resulted in a 0.29% increase in post-investment trade marking activity, significant at the 1% level. Historical trade marking activity predicted a 2.91% rise in post-investment trade marking following a 10% increase in investment.

For growth stage companies, a 10% increase in pre-investment patenting predicts a 3.76% rise in post-investment patenting. Similarly, a 10% increase in pre-investment trade marking predicts a 4.48% rise in post-investment trade marking. The relationship between amounts invested proves to be positive and significant, although not to the extent exhibited by the whole sample of companies.

At the buyout stage, historical patenting and trade marking activities are strong predictors of post-investment IP filings. A 10% increase in pre-investment patenting predicts a 3.59% rise in post-investment patenting. Similarly, a 10% increase in pre-investment trade marking predicts a 4.96% rise in post-investment trade marking. The coefficient of the increase in investment is not statistically significant for determining any change in patenting activity, while it proves to increase trade marking activity by 1.3%, on average.

The sample reveals a positive correlation between the amounts invested by private equity and venture capital firms and the subsequent increase in patenting and trade marking activities of their portfolio companies. This relationship holds across various stages of company development, from venture to buyout stages. Historical IP activity is also a significant predictor of future IP filings, emphasising the importance of prior IP management in maximising the innovation creation of new investments.