A Paper Co-authored by Huasheng Gao and Yan Gu Wins Best Paper of the Year Prized by Journal of Corporate Finance | Academic

Release time：2026-03-26    

Recently, the Journal of Corporate Finance, a leading journal in the field of international corporate finance, announced its 2024 journal awards. The paper entitled “Patent Pledgeability, Trade secrecy, and Corporate Patenting” coauthored by Huasheng Gao, Deputy Dean of Faculty and Research at FISF and Professor in Finance; Yan Gu, Researcher at FISF and PhD in Applied Economics at Fudan University; Yongqing Wang, Professor at the School of Economics, Fudan University; Yanke Dai, Associate Professor at Shanghai University of International Business and Economics; and Ting Du from Central University of Finance and Economics; won the Best Paper Prize–runner up. This award recognizes the two best papers of the year published in the journal. The article was published in Volume 85 of the journal in 2024 and has since garnered widespread impact, being selected as an ESI Highly Cited Paper. This achievement highlights the international academic influence of Fudan scholars in the fields of corporate finance and technology finance.

Huasheng Gao

Deputy Dean of Faculty and Research at FISF

Professor in Finance

Yan Gu

Researcher at FISF

PhD in Applied Economics at Fudan University

Main content of the paper:

In the era of the knowledge economy, intangible assets such as patents are increasingly becoming the most critical carriers of corporate value. However, compared with tangible assets like factories, equipment and land, intangible assets have long faced financing obstacles characterized by “difficult value identification, difficult risk assessment, and difficult disposal execution”. Innovation-driven enterprises, despite possessing strong technological capabilities and innovation potentials, often struggle to access external financing due to a lack of traditional collateral. Therefore, it has become an important issue in the fields of innovation and corporate finance to figure out how to enhance the pledgeability of intangible assets such as patents, thereby improving the financing environment for innovation-driven enterprises.

On the other hand, enterprises typically face two basic choices when protecting their innovation outcomes: first, to apply for patents, exchanging disclosure for legal protection; and second, to keep the business secrets, preserving a competitive advantage through nondisclosure. Patents and business secrets are not simply complementary—more often, they serve as substitutes. An increase in patent pledgeability may not only change the financing conditions for enterprises but may also alter their strategic trade-off between “patent application” and “secret preservation”. So, it carries both theoretical importance and policy significance to understand how patent pledgeability influences corporate innovation behavior and the channels through which this effect works.

The paper drew on the staggered rollout of patent pledge financing pilots in Chinese cities as a quasi-natural experiment and applying a difference-in-differences (DID) approach based on a sample of Chinese listed firms from 2006 to 2017. Then the authors systematically identified the impact of enhanced patent pledgeability on corporate innovation. The results show that firms in pilot cities experienced significant increases in both patent counts and citations after the implementation of the patent pledge financing policy. Baseline estimates indicate that enhanced patent pledgeability leads to an average increase of approximately 17%-19% in patent counts and 15%-16% in patent citations, suggesting that this policy not only boosts corporate patent output but also enhances the quality and impact of innovation outcomes.

Further studies show that the core mechanism driving this positive effect does not primarily come from “the easing of financing constraints”, but rather from firms’ adjustments to innovation protection strategies—a shift from relying on business secrets to preserving innovation outcomes through patents. By examining the frequency of key terms in corporate annual reports, the paper finds a significant decline in firms’ reliance on business secrets following the policy implementation. Moreover, this effect comes stronger among firms with more complex technologies, lower labor mobility, and lower risk of secret leakage, implying that enhanced patent pledgeability encourages firms to convert knowledge outcomes previously accumulated as business secrets into formal patents.

It is also revealed in the paper that newly added patents are primarily concentrated in the existing technological fields of firms, not in entirely new areas. This suggests the policy is more about promoting the “externalization” and “patenting” of previously tacit knowledge, rather than simply pushing firms into unfamiliar R&D directions. At the same time, these newly added patents exhibit higher scientific and economic value, which means the shift from business secrets to patents is not a mere “quantitative expansion”, but is accompanied by higher-quality intellectual property output.

Notably, this paper finds no evidence that “the easing of financing constraints” is the main transmission channel. On the contrary, the policy effects are more pronounced among firms with larger scales, stronger profitability and more tangible assets. Besides, relevant firms chose not to significantly increase R&D investment but to add securities investment after the policy implementation, leading to the conclusion that patent pledge financing does not necessarily translate directly into R&D funding. Instead, its primary role is to reshape how firms manage intellectual property protection and allocate assets, rather than just easing financing constraints.

In summary, this study links intellectual property protection, innovation incentives, and the financialization of intangible assets, providing new empirical evidence on how patent pledge financing policy influences the real innovation behavior of firms. The role of patent financing policy extends beyond “transfusion-style funding support” and lies more in reshaping firms’ innovation protection strategies by altering the economic properties and contractual functions of intellectual property. For policymakers, advancing intellectual property finance means more than expanding loan volumes, requiring greater emphasis on institutional infrastructure, including patent valuation, trading, disposal, information disclosure and legal protection.

In a broader sense, enhanced patent pledgeability helps transform intangible assets from “dormant resources” into tradable, financeable and allocable financial resources. It also improves the social accessibility of innovation-related information, reduces redundant R&D, and promotes knowledge diffusion and collaborative innovation. This carries important lessons for perfecting the tech finance system, raising the efficiency of innovation resource allocation, and supporting high-quality development.

Journal Introduction

Journal of Corporate Finance is a highly influential, internationally recognized academic journal in the field of corporate finance. It primarily publishes high-quality theoretical and empirical research in corporate finance and relevant areas, covering topics such as capital structure, corporate governance, financial contracts, risk management and international corporate finance. With its distinct disciplinary position, rigorous peer-review process and sustained academic influence, Journal of Corporate Finance is widely respected within the corporate finance research community.

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https://www.sciencedirect.com/science/article/pii/S0929119924000257?sessionid=