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Patents to Products: Innovation and Firm Performance

Author

Listed:
  • David Argente

    (University of Chicago)

  • Douglas Hanley

    (University of Pittsburgh)

  • Salome Baslandze

    (EIEF - Einaudi Institute for Economics a)

  • Sara Moreira

    (Northwestern University)

Abstract

What do standard patent-based innovation measures capture? Using the unique match of firms’ patenting activities and their product introduction in the con sumer goods sector, we study the relationship between patents and innovation. Our current results indicate that both at the extensive margin and the intensive margin, patents (and citations-adjusted patents) are strongly associated with higher product introduction as well as product destruction and hence larger re allocation at the firm level. We provide additional evidence that this association is at least partly causal. Firms that are patenting also introduce products of higher quality, enjoy larger sales and hold more diverse set of products. We disentangle the effect of patents on product versus process innovation, distinction that has been hard to measure from standard data sources. We find that the effect of patenting on product creation is larger for smaller firms, while the process innovation seems more pronounced in larger firms. Textual analysis of patents and product descriptions sheds additional light on the exact transmission of innovation embedded in the patents into specific product creation.

Suggested Citation

  • David Argente & Douglas Hanley & Salome Baslandze & Sara Moreira, 2018. "Patents to Products: Innovation and Firm Performance," 2018 Meeting Papers 858, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:858
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    Cited by:

    1. John C. Haltiwanger, 2020. "Comment on "Innovative Growth Accounting"," NBER Chapters, in: NBER Macroeconomics Annual 2020, volume 35, pages 296-307, National Bureau of Economic Research, Inc.

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