Patenting Behaviour and the Survival of Newly Listed European Software Firms

We test whether patenting activity impacts on software companies' likelihood of survival after going public in the UK, Germany, France, Sweden, Italy and Spain. Our database covers all software companies undertaking IPOs in these six countries between 1 January 1997 and 31 December 2005, and includes data from various sources (the Bureau van Dijk Zephyr database, the Questel-Orbit QPAT patent database, financial documents available on the company websites and specialised websites). Survival analysis follows a semi-parametric approach, based on the stratified Cox competing risk model, controlling for other determinants of survival. We find that, after controlling for the firms' main entry characteristics (experience, size, sales, profitability and solvency, together with market conditions), the influence of the size and the quality of the firms' patent portfolios is different according to the type of exit and the type of software firm. In particular, the number of patents reduces the risk of failure and acquisition for software developers, while quality increases their attractiveness as an acquisition target.