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Research Productivity and Patent Quality: Measurement with Multiple Indicators

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  • Jean Olson Lanjouw
  • Mark Schankerman
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    Abstract

    We analyse the determinants of the decline in measured research productivity (the patent/R&D ratio)using panel data on manufacturing firms in the U.S. for the period 1980-93. We focus on three factors: the level of demand, the quality of patents, and technological exhaustion. We first develop an index of patent 'quality' using detailed information on patents in the U.S. in seven technology fields. Using a factor model, we construct a minimum-variance index based on four patent characteristics and show that using multiple indicators substantially reduces the measured variance in quality. We then show that research productivity at the firm level is negatively related to the patent quality index and the level of demand, as predicted by an optimizing model of R&D, and positively related to the stock market valuation of patented innovations held by firms.

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    File URL: http://sticerd.lse.ac.uk/dps/ei/ei32.pdf
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    Bibliographic Info

    Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Economics of Industry Papers with number 32.

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    Date of creation: Dec 2002
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    Handle: RePEc:cep:stieip:32

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    Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

    Related research

    Keywords: Patents; R&D productivity; technological exhaustion.;

    This paper has been announced in the following NEP Reports:

    References

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    1. Hall, Bronwyn H. & Jaffe, Adam & Trajtenberg, Manuel, 2001. "Market Value and Patent Citations: A First Look," Department of Economics, Working Paper Series qt8vh1c20f, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    2. Adam Jaffe & Manuel Trajtenberg, 1999. "International Knowledge Flows: Evidence From Patent Citations," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 8(1-2), pages 105-136.
    3. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343 National Bureau of Economic Research, Inc.
    4. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
    5. Zvi Griliches, 1984. "Market Value, R&D, and Patents," NBER Chapters, in: R & D, Patents, and Productivity, pages 249-252 National Bureau of Economic Research, Inc.
    6. Kortum, Samuel, 1993. "Equilibrium R&D and the Patent-R&D Ratio: U.S. Evidence," American Economic Review, American Economic Association, vol. 83(2), pages 450-57, May.
    7. Evenson, Robert E, 1993. "Patents, R&D, and Invention Potential: International Evidence," American Economic Review, American Economic Association, vol. 83(2), pages 463-68, May.
    8. repec:fth:harver:1473 is not listed on IDEAS
    9. Robert Evenson, 1984. "International Invention: Implications for Technology Market Analysis," NBER Chapters, in: R & D, Patents, and Productivity, pages 89-126 National Bureau of Economic Research, Inc.
    10. Zvi Griliches, 1998. "Productivity, R&D, and the Data Constraint," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 347-374 National Bureau of Economic Research, Inc.
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