Venture capitalists often rely on patents to evaluate startups’ technological capabilities. Patents referencing scientific papers are generally regarded as more valuable, motivating startups to include scientific citations in their patents to convey a sense of scientific endorsement, even if no meaningful connection exists between the cited research and the patent itself. In this study, we propose that the retraction of scientific papers cited in patents undermines the scientific endorsement they provide, damaging a startup’s technological reputation and hindering its subsequent venture capital activities. Notably, startups making superficial or window-dressing citations—those lacking substantive relevance—are not exempt from these negative effects. Drawing on a dataset of U.S. startups (1990–2021) and employing a staggered difference-in-differences methodology, we find that paper retractions nearly halve a startup’s chances of securing subsequent venture capital and reduce annual funding by an average of 13.41% (about $260,000) across the entire post-retraction period. The detrimental effects are particularly pronounced for early-stage startups and those located in entrepreneurial hubs. Overall, these findings highlight the risks associated with superficial citation practices, emphasizing that even superficial scientific citations can result in substantial economic losses when their credibility is invalidated. This study underscores the need for startups to critically assess the reliability of the scientific foundations cited in their patents and advances understanding of the broader economic and governance implications of false science.
