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The Relationship among innovative Output, Productivity, and Profitability. A test comparing USPTO and EPO data

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Author Info
Enrico Santarelli () (University of Bologna, Department of Economics; ENCORE, Amsterdam; Max Planck Institute of Economics Jena, Entrepreneurship, Growth and Public Policy)
Francesca Lotti (Bank of Italy, Economic Research Department)

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Abstract

The aim of this paper is to test whether patent-based indicators are still reliable measures of innovativeness in light of organizational changes in the field of Intellectual Property Rights (IPR) protection and the regulatory reforms already under way respectively at the U.S. Patent and Trademark Office (USPTO) and the European Patent Office (EPO). For most high-tech industries, patents represent an outcome of the production process and their number can be taken as a proxy for a firm's ability to improve its productivity growth and profitability. The case study reported here concerns the biotechnology industry in Italy, whose firms, by definition, have Intellectual Property (IP) activities in their portfolios. For this purpose, we use a unique data set which collects balance sheet items and patent information from EPO and USPTO. After linking firms' financial and production data with the patent information, we estimate a modified knowledge production function in which the dependent variable is alternatively (labor) productivity growth and profitability. Our findings show that only patents with the EPO, along with larger firm size, have a statistically significant relationship with productivity growth and profitability. This suggests that firms pursue different strategies when patenting with the USPTO and the EPO, and that this difference reflects statutory changes made to the former during the relevant period.

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Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics, Thueringer Universitaets- und Landesbibliothek in its series Jena Economic Research Papers in Economics with number 2007-020.

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Date of creation: 25 Jun 2007
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Handle: RePEc:jrp:jrpwrp:2007-020

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Related research
Keywords: IP Protection; Productivity; Profitability; Italy;

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Find related papers by JEL classification:
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights

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    Other versions:
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  3. Archibugi, Daniele & Coco, Alberto, 2005. "Measuring technological capabilities at the country level: A survey and a menu for choice," Research Policy, Elsevier, vol. 34(2), pages 175-194, March. [Downloadable!] (restricted)
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  6. Franco Malerba & Luigi Orsenigo, 2002. "Innovation and market structure in the dynamics of the pharmaceutical industry and biotechnology: towards a history-friendly model," Industrial and Corporate Change, Oxford University Press, vol. 11(4), pages 667-703, August.
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  10. Santarelli, Enrico & Piergiovanni, Roberta, 1996. "Analyzing literature-based innovation output indicators: the Italian experience," Research Policy, Elsevier, vol. 25(5), pages 689-711, August. [Downloadable!] (restricted)
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  11. Acs, Zoltan J & Audretsch, David B, 1988. "Innovation in Large and Small Firms: An Empirical Analysis," American Economic Review, American Economic Association, vol. 78(4), pages 678-90, September. [Downloadable!] (restricted)
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  15. Lionel Nesta & Pier-Paolo Saviotti, 2006. "Firm knowledge and market value in biotechnology," Industrial and Corporate Change, Oxford University Press, vol. 15(4), pages 625-652, August.
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