Letting businesses use their patents as collateral for loans can boost a whole country’s economic output by 14%.
SSRN · March 17, 2026 · 6302558
The Takeaway
Using a quasi-natural experiment in China, researchers found that the inability to borrow against intellectual property (IP) is a primary cause of capital misallocation. When banks treat ideas like physical buildings, high-productivity but low-wealth startups can finally outcompete established but inefficient giants, creating a massive boost to the entire economy.
From the abstract
We study how expanding access to intellectual property (IP)-backed credit affects firm innovation and aggregate total factor productivity (TFP). Exploiting China's IP-backed financing pilot as a quasi-natural experiment, we use difference-indifferences estimates to show that the policy increases R&D participation, raises firm-level productivity, and reduces capital misallocation. To interpret these effects and quantify their aggregate implications, we develop a dynamic model of heterogeneous