Abstract: We use LLMs to decompose patent disclosure complexity into fundamental and strategic obfuscation components. Patent obfuscation has increased sharply across technology sectors over the past 15 years. Obscure disclosure deters competitor innovation and reduces infringement litigation but decreases patents’ financing capacity. Using examiner strictness as an instrument, we show obfuscation reduces both competitor innovation and the probability of litigation while lowering the rate at which patents are sold or pledged as collateral. Following policy or financing shocks, firms’ obfuscation responses depend on their reliance on external finance. Our findings reveal a tradeoff: firms balance opaque disclosure in patents against their need to attract external capital, a new channel through which financing can shape the trajectory of innovation.
Discussant: Stephen Glaeser, University of North Carolina-Chapel Hill
Johannes Jaspersen, Ludwig-Maximilian University of Munich
Valentin Luz, Ludwig-Maximilian University of Munich
Abstract: We investigate whether the U.S. patent examiner lottery, which is intended to ensure random assignment and equal treatment of applicants, can be strategically manipulated. Using data on six million applications from 2001–2020, we derive the null distribution of examiner leniency under true randomization and show that many law firms and in-house counsel systematically obtain \emph{far} more lenient examiners than chance would permit. We document multiple mechanisms consistent with strategic manipulation, including leveraging institutional knowledge and the exploitation of publicly observable examiner workloads. These deviations from randomness have economically meaningful consequences: sorting firms on examiner leniency at publication produces sizable and statistically significant return spreads, implying that markets only partially incorporate assignment-based variation in approval likelihood. We develop a simple model of manipulation investments that explains which firms are most likely to game the patent lottery and show empirical support for its predictions. Our findings challenge the fairness of the patent lottery and call into question empirical designs that rely on examiner randomization for causal identification.
Discussant: Joan Farre-Mensa, University of Illinois-Chicago
Spyridon Lagaras, University of Illinois-Urbana-Champaign
Abstract: Do social transfer programs boost entrepreneurship among low-income populations? We address this question by examining Brazil's Bolsa Família—the world's largest cash transfer program—and its effects on entrepreneurial entry, performance, and economic mobility. Using administrative data covering 2.3 million sole-proprietorships, we track entrepreneurs through the complete business lifecycle—from entry through performance to post-failure employment. We address selection combining instrumental variables—exploiting bunching across program eligibility thresholds—with matching and granular fixed effects. We first show that cash transfers increase transitions into entrepreneurship from both non-employment and wage employment, increasing beneficiaries' representation among entrepreneurs. We then identify systematic performance disadvantages: cash-transfer entrepreneurs exhibit lower survival, business growth, employment creation, and credit access, eventually facing higher rates of tax violations and debt collection proceedings. Performance gaps appear to reflect two mechanisms: managerial constraints—evident in hiring less-educated workers at higher wages with stable employment—and dependency effects revealed by income bunching to maintain eligibility. Yet these same hiring patterns, along with stronger recruitment of racial minorities, produce positive spillovers extending beyond cash-transfer recipients. Examining post-entrepreneurship trajectories, we find that cash-transfer entrepreneurs secure worse jobs after business failure—lower occupational attainment and reduced earnings. However, their wage losses are 61\% smaller than those of other failed entrepreneurs—suggesting the entrepreneurial experience builds human capital that disproportionately benefits cash-transfer participants. Our analysis—the first to track cash-transfer entrepreneurs through entry, performance, and post-failure outcomes—reveals that while these programs succeed at poverty alleviation, the businesses they create remain trapped in subsistence, generating neither growth nor pathways to economic mobility.
