Trademarks reduce the exit rate of small firms, signal greater quality to funders, and fosters more partnerships – consensus of studies proves the AFF is net-positive for small firms.
Power & Reid 20 – Bernadette Power (Ph.D. from the Department of Economics and Finance, University of St. Andrews, Lecturer in the Department of Economics, Cork University Business School); Gavin Reid (MA Economic Science, University of Aberdeen, MSc in Economic Theory and Econometrics, University of Southampton, Ph.D. in oligopoly theory, modelling price leadership and partial monopoly, University of Edinburgh), 11-23-2020, "The impact of intellectual property types on the performance of business start-ups in the United States", International Small Business Journal: Researching Entrepreneurship, https://journals.sagepub.com/doi/abs/10.1177/0266242620967009 /$antiP/
Trademarks protect brands rather than inventions; they signal product quality and help consumers to differentiate between the products of a firm and its rivals (Besen and Raskind, 1991; Landes and Posner, 1987). Small- and medium-sized enterprises (SMEs) are more likely to engage in trademarking than larger firms (Greenhalgh and Rogers, 2010; Rogers et al., 2007); they differentiate their products in niche markets thus, strengthening their branding (Block et al., 2015). It is also less costly and less complex to register trademarks, which arguably signals quality to equity funders, and fosters partnerships and strategic alliances (Block et al., 2015; Motohashi, 2008). We argue that the effects of trademarks on performance are likely to be positive (Greenhalgh and Rogers, 2012; Sandner and Block, 2011); in support, Srinivasan et al. (2008), Jensen et al. (2008) and Helmers and Rogers (2010) find that small firm trademarks reduce their exit rate. Therefore, H2 states that, for start-ups, a positive relationship exists between trademarking and performance.