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The market value of patents and R&D: Evidence from European firms

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Author Info
Bronwyn H. Hall
Grid Thoma
Salvatore Torrisi

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Abstract

This paper provides novel empirical evidence on the private value of patents and R&D in European firms during the period 1991-2004. We explore the relationship between firm's stock market value, patents, and "quality"-weighted patents issued by the European Patent Office (EPO) and the US Patent and Trademark Office (USPTO). We find that Tobin's q is positively and significantly associated with R&D and patent stocks, but that only those patents taken out in both patent offices or at the USPTO alone seem to be valued. Either forward citations or a composite quality indicator based on forward citations, family size and the number of technical fields covered by the patent are modestly informative for value. Software patents account for a rising share of total patents in the USPTO and EPO. Moreover, some scholars of innovation and intellectual property rights argue that software and business methods patents on average are of poor quality and that these patents are applied for merely to build portfolios rather than for protection of real inventions. We found that such patents are considerably more valuable than ordinary patents, especially if they are taken out in the U.S. However their quality indicators are no more valuable than those of other patents, suggesting that their primary purpose may be to increase the size of the patent portfolio.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13426.

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Date of creation: Sep 2007
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Handle: RePEc:nbr:nberwo:13426

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Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Hall, Bronwyn H. & Mairesse, Jacques, 1995. "Exploring the relationship between R&D and productivity in French manufacturing firms," Journal of Econometrics, Elsevier, vol. 65(1), pages 263-293, January. [Downloadable!] (restricted)
    Other versions:
  2. Blundell, Richard & Griffith, Rachel & van Reenen, John, 1999. "Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms," Review of Economic Studies, Blackwell Publishing, vol. 66(3), pages 529-54, July. [Downloadable!] (restricted)
  3. Joshua Lerner, 1994. "The Importance of Patent Scope: An Empirical Analysis," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 319-333, Summer. [Downloadable!] (restricted)
  4. Griliches, Zvi, 1990. "Patent Statistics as Economic Indicators: A Survey," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1661-1707, December. [Downloadable!] (restricted)
    Other versions:
  5. Bronwyn H. Hall & Megan MacGarvie, 2006. "The Private Value of Software Patents," NBER Working Papers 12195, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-58, June. [Downloadable!] (restricted)
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  7. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  8. Hall, B. & Jaffe, A. & Trajtenberg, M., 2001. "The NBER Patent Citations Data File: Lessons, Insights and Methodological Tools," Papers 2001-29, Tel Aviv.
    Other versions:
  9. Cynthia A. Montgomery & Birger Wernerfelt, 1988. "Diversification, Ricardian Rents, and Tobin's q," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 623-632, Winter. [Downloadable!] (restricted)
  10. Arundel, Anthony, 2001. "The relative effectiveness of patents and secrecy for appropriation," Research Policy, Elsevier, vol. 30(4), pages 611-624, April. [Downloadable!] (restricted)
  11. Zvi Griliches, 1979. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 92-116, Spring. [Downloadable!] (restricted)
    Other versions:
  12. Zvi Griliches & Bronwyn H. Hall & Ariel Pakes, 1991. "R&D, Patents, and Market Value Revisited: Is There Evidence of A SecondTechnological Opportunity Related Factor?," NBER Working Papers 2624, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Hall, B.H., 1999. "Innovation and Market Value," Economics Papers 1999-w3, Economics Group, Nuffield College, University of Oxford.
    Other versions:
  14. Bronwyn H. Hall & Adam Jaffe & Manuel Trajtenberg, 2005. "Market Value and Patent Citations," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 16-38, Spring.
  15. Griliches, Zvi, 1981. "Market value, R&D, and patents," Economics Letters, Elsevier, vol. 7(2), pages 183-187. [Downloadable!] (restricted)
    Other versions:
  16. repec:fth:harver:1473 is not listed on IDEAS
  17. Guellec, Dominique & Pottelsberghe de la Potterie, Bruno v., 2000. "Applications, grants and the value of patent," Economics Letters, Elsevier, vol. 69(1), pages 109-114, October. [Downloadable!] (restricted)
  18. Dietmar Harhoff & Francis Narin & F. M. Scherer & Katrin Vopel, 1999. "Citation Frequency And The Value Of Patented Inventions," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 511-515, August. [Downloadable!] (restricted)
  19. Teece, David J., 1986. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," Research Policy, Elsevier, vol. 15(6), pages 285-305, December. [Downloadable!] (restricted)
  20. Jean O. Lanjouw & Mark Schankerman, 2004. "Patent Quality and Research Productivity: Measuring Innovation with Multiple Indicators," Economic Journal, Royal Economic Society, vol. 114(495), pages 441-465, 04. [Downloadable!] (restricted)
  21. Fabio Montobbio & E. Bacchiocchi, 2004. "EPO vs. USPTO Citation Lags," CESPRI Working Papers 161, CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy, revised Sep 2004. [Downloadable!]
  22. Bronwyn H. HALL & Raffaele ORIANI, 2004. "Does the Market Value R&D Investment by European Firms? Evidence from a Panel of Manufacturing Firms in France," Economics Working Papers ECO2004/13, European University Institute. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ejermo, Olof & Kander, Astrid, 2007. "Swedish business research productivity – improvements against international trends," CIRCLE Electronic Working Paper Series 2007-07, CIRCLE (Centre for Innovation, Research and Competence in the Learning Economy), Lund University. [Downloadable!]
  2. Schettino, Francesco & Sterlacchini, Alessandro & Venturini, Francesco, 2008. "Inventive Productivity and Patent Quality: Evidence from Italian Inventors," MPRA Paper 7765, University Library of Munich, Germany. [Downloadable!]
  3. Marco Da Rin & María Fabiana Penas, 2007. "The Effect of Venture Capital on Innovation Strategies," NBER Working Papers 13636, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Bronwyn H. Hall & Grid Thoma & Salvatore Torrisi, 2009. "Financial Patenting in Europe," NBER Working Papers 14714, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Grid Thoma & Salvatore Torrisi, 2007. "Creating Powerful Indicators for Innovation Studies with Approximate Matching Algorithms. A test based on PATSTAT and Amadeus databases," CESPRI Working Papers 211, CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy, revised Dec 2007. [Downloadable!]
  6. Heli Koski & Luigi -Mäkinen Marengo, 2009. "Managerial Practices, Performance and Innovativeness: Some Evidence from Finnish Manufacturing," Discussion Papers 1176, The Research Institute of the Finnish Economy. [Downloadable!]
  7. Schneider, Cédric & Hussinger, Katrin & Czarnitzki, Dirk, 2008. "Commercializing Academic Research: The Quality of Faculty Patenting," ZEW Discussion Papers 08-069, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
    Other versions:
  8. Marcus Wagner, 2008. "Technology sourcing by large incumbents through acquisition of small firms," SFB 649 Discussion Papers SFB649DP2008-055, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
  9. Ejermo, Olof, 2007. "Regional innovation measured by patent data – does quality matter?," CIRCLE Electronic Working Paper Series 2007-08, CIRCLE (Centre for Innovation, Research and Competence in the Learning Economy), Lund University. [Downloadable!]
  10. Svensson, Roger, 2008. "Renewal of Patents and Government Financing," Working Paper Series 759, Research Institute of Industrial Economics. [Downloadable!]
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