Come and take it: Patenting pedigree and tenacity, takeover defenses, and patent valuation in post-IPO firms

Abstract

Drawing on the appropriability–appropriation framework and signaling theory, we hypothesize that post-IPO firms with higher patent quality use takeover defenses as levers to signal a willingness to allow appropriation through acquisitions. In a sample of 635 post-IPO firms with 56,605 patent approvals (1998–2014), if post-IPO firms secure approval for a high pedigree patent (cutting edge technology) or obtain a longer grant lag (tenacity), the stock market reaction is positive (negative) when anti-takeover defenses are lowered (raised) from the previous year. The findings carry implications for the appropriability–appropriation strategies of post-IPO firms and the merit of reducing takeover defenses for these firms.