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Market Value and Patent Citations

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Author Info

  • Bronwyn H. Hall

    ()
    (University of California, Berkeley, NBER, IFS)

  • Adam Jaffe

    ()
    (Brandeis University, NBER)

  • Manuel Trajtenberg

    ()
    (Tel Aviv University, NBER, CEPR)

Abstract

We explore the usefulness of patent citations as a measure of the "importance" of a firm's patents, as indicated by the stock market valuation of the firm's intangible stock of knowledge. Using patents and citations for 1963--1995, we estimate Tobin's q equations on the ratios of R&D to assets stocks, patents to R&D, and citations to patents. We find that each ratio significantly affects market value, with an extra citation per patent boosting market value by 3%. Further findings indicate that "unpredictable" citations have a stronger effect than the predictable portion, and that self-citations are more valuable than external citations.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 36 (2005)
Issue (Month): 1 (Spring)
Pages: 16-38

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Handle: RePEc:rje:randje:v:36:y:2005:1:p:16-38

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Related research

Keywords: Search; Learning; Information and Knowledge Asset Pricing Information and Market Efficiency; Event Studies Financing Policy; Capital and Ownership Structure; financial ratios; value of firm Intellectual Property Rights: National and International Issues (patents; copyrights) Firm; Knowledge; Stock Market; Stocks;

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