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R&D and the Patent Premium

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Author Info
Ashish Arora
Marco Ceccagnoli
Wesley M. Cohen

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Abstract

We analyze the effect of patenting on R&D with a model linking a firm's R&D effort with its decision to patent, recognizing that R&D and patenting affect one another and are both driven by many of the same factors. Using survey data for the U.S. manufacturing sector, we estimate the increment to the value of an innovation realized by patenting it, and then analyze the effect on R&D of changing that premium. Although patent protection is found to provide a positive premium on average in only a few industries, our results also imply that it stimulates R&D across almost all manufacturing industries, with the magnitude of that effect varying substantially.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9431.

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Date of creation: Jan 2003
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Handle: RePEc:nbr:nberwo:9431

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Find related papers by JEL classification:
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D

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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. Lerner, Josh, 1995. "Patenting in the Shadow of Competitors," Journal of Law & Economics, University of Chicago Press, vol. 38(2), pages 463-95, October.
  2. Scherer, F. M. & Harhoff, Dietmar, 2000. "Technology policy for a world of skew-distributed outcomes," Research Policy, Elsevier, vol. 29(4-5), pages 559-566, April. [Downloadable!] (restricted)
  3. Needham, Douglas, 1975. "Market Structure and Firms' R & D Behavior," Journal of Industrial Economics, Blackwell Publishing, vol. 23(4), pages 241-55, June. [Downloadable!] (restricted)
  4. Jan Boone, 2000. "Competitive Pressure: The Effects on Investments in Product and Process Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 549-569, Autumn.
  5. Arundel, Anthony & Kabla, Isabelle, 1998. "What percentage of innovations are patented? empirical estimates for European firms," Research Policy, Elsevier, vol. 27(2), pages 127-141, June. [Downloadable!] (restricted)
  6. Pakes, Ariel S, 1986. "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks," Econometrica, Econometric Society, vol. 54(4), pages 755-84, July. [Downloadable!] (restricted)
  7. James D. Adams, 2000. "Endogenous R&D Spillovers and Industrial Research Productivity," NBER Working Papers 7484, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Hicks, Diana & Breitzman, Tony & Olivastro, Dominic & Hamilton, Kimberly, 2001. "The changing composition of innovative activity in the US -- a portrait based on patent analysis," Research Policy, Elsevier, vol. 30(4), pages 681-703, April. [Downloadable!] (restricted)
  9. Ariel Pakes, 1986. "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks," NBER Working Papers 1340, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Cohen, Wesley M & Klepper, Steven, 1996. "A Reprise of Size and R&D," Economic Journal, Royal Economic Society, vol. 106(437), pages 925-51, July. [Downloadable!] (restricted)
  11. Ashish Arora & Andrea Fosfuri & Alfonso Gambardella, 2004. "Markets for Technology: The Economics of Innovation and Corporate Strategy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511819.
  12. Scotchmer, Suzanne, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter. [Downloadable!] (restricted)
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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. Czarnitzki, Dirk & Toole, Andrew A., 2006. "Patent protection, market uncertainty, and R&D investment," ZEW Discussion Papers 06-56, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  2. Elif Bascavusoglu & Maria Pluvia Zuniga, 2005. "The effects of intellectual property protection on international knowledge contracting," Cahiers de la Maison des Sciences Economiques bla05009, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
  3. Robert Hunt & James Bessen, 2004. "The software patent experiment," Business Review, Federal Reserve Bank of Philadelphia, issue Q3, pages 22-32. [Downloadable!]
  4. Etienne Pfister & Bruno Deffains & Myriam Doriat-Duban & Stéphane Saussier, 2006. "Institutions and contracts: Franchising," European Journal of Law and Economics, Springer, vol. 21(1), pages 53-78, January. [Downloadable!] (restricted)
  5. Emmanuel Duguet & Claire Lelarge, 2004. "Does patenting increase the private incentives to innovate ? A microeconometric analysis," Cahiers de la Maison des Sciences Economiques v04096, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
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  6. Simona Tenaglia & Marco Ventura, 2008. "Valuing environmental patents legal protection when data is not available," ISAE Working Papers 103, ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY). [Downloadable!]
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