Does Patent Signalling Vary Contingently Under Technology Intensity? Evidence From High-tech and Low-tech IPO Firms in Japan

Authors

  • Le Thuy Ngoc An Graduate School of Science and Technology for Innovation, Yamaguchi University, Yamaguchi, Japan
  • Norliza Che Yahya Faculty of Business and Management, Universiti Teknologi MARA, Selangor, Malaysia
  • Yoshiyuki Matsuura Graduate School of Science and Technology for Innovation, Yamaguchi University, Yamaguchi, Japan

Abstract

Prior studies pointed out evidences on Start-ups and Venture Capital (VC) companies use different measures for providing signals to outsiders. This study adds to the previous insight by focusing instead on established firm’s patenting behaviors and their effect on the amount of money raised at the Initial Public Offering (IPO). Since technology intensity may considerably differ between High-tech and Low-tech companies, our main interest in this paper is whether the significance of pre-IPO patenting activities as a predictor of IPO performance is considerably different between High-tech Industry and Low-tech Industry. Using cross-sectional data for 308 Japanese industrial firm’s commitments to IPO between 2000 and 2015, we find a robust positive correlation between patent applications and IPO performance. Contrary to the conventional wisdom proposing that High-tech firms with more patenting activities achieve better IPO performance, we find that the signaling power of patenting is stronger for Low-tech companies. In other words, while High-tech firms do not seem to benefit from a patent signal, Low-tech firms tend to attract external investors easier by patent at IPO.

Keyword:Patent, Signal, Initial Public Offering (IPO), High-tech Industries, Low-tech Industries

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Submitted

2022-01-10

Published

2026-06-30

Issue

Proceedings of The 6th International Conference on Management in Emerging Markets (ICMEM) 2021

Section

Selected Papers