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The Effects on Firm Profits of the Stock of Intellectual Property Rights

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  • William E. Griffiths

    (Centre for Microeconometrics, Department of Economics, The University of Melbourne)

  • Paul H. Jensen

    ()
    (Melbourne Institute of Applied Economic and Social Research, and Intellectual Property Research Institute of Australia, The University of Melbourne)

  • Elizabeth Webster

    ()
    (Melbourne Institute of Applied Economic and Social Research, and Intellectual Property Research Institute of Australia, The University of Melbourne)

Abstract

The effects of innovation on firm performance is conventionally analysed using R&D or patent applications as measures for innovation capital and market value as the measure of firm performance. We argue that such studies fall short in three important respects. First, the proxies used for innovation capital are flows not stocks as the theory suggests. Secondly, while they are derived from the theory of intangible capital, their estimations ignore other important intangible capital such as organisational and marketing capital; and thirdly, by using market value, the studies heroically assume that stock markets work efficiently. In this paper, we develop a model of the effects of intangible capital, including, but not limiting to, innovation capital, on firm profits, using new measures for the former. Our results indicate that profits vary, ceteris paribus, according to the type of IP rights held by the firm, the age of the firm, the size of the firm, and the lifespan of the IP right.

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Bibliographic Info

Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2005n04.

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Length: 23 pages
Date of creation: Apr 2005
Date of revision:
Handle: RePEc:iae:iaewps:wp2005n04

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Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
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Cited by:
  1. Nicolas van Zeebroeck, 2011. "The Puzzle of Patent Value Indicators," ULB Institutional Repository 2013/60729, ULB -- Universite Libre de Bruxelles.
  2. Christine Greenhalgh & Mark Rogers, 2007. "The Value of Intellectual Property Rights to Firms," Discussion Papers 06-036, Stanford Institute for Economic Policy Research.
  3. van Pottelsberghe, Bruno & van Zeebroeck, Nicolas, 2008. "Filing Strategies and Patent Value," CEPR Discussion Papers 6821, C.E.P.R. Discussion Papers.
  4. Crass, Dirk & Schwiebacher, Franz, 2013. "Do trademarks diminish the substitutability of products in innovative knowledge-intensive services?," ZEW Discussion Papers 13-061, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Nicolas van Zeebroeck, 2007. "Patents only live twice: a patent survival analysis in Europe," Working Papers CEB 07-028.RS, ULB -- Universite Libre de Bruxelles.
  6. Christine Greenhalgh & Mark Rogers, 2007. "Trade Marks and Performance in UK Firms: Evidence of Schumpeterian Competition through Innovation," Economics Series Working Papers 300, University of Oxford, Department of Economics.
  7. Bessen, James, 2009. "Estimates of patent rents from firm market value," Research Policy, Elsevier, vol. 38(10), pages 1604-1616, December.
  8. Paul H. Jensen & Elizabeth Webster, 2006. "Market Power, Brand Characteristics and Demand for Retail Grocery Products," Melbourne Institute Working Paper Series wp2006n05, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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