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The Generation and Exploitation of Technological Change: Market Value and Total Factor Productivity

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  • Antonelli, Cristiano

    ()

  • Colombelli, Alessandra

    ()
    (University of Turin)

Abstract

In this paper we articulate and test the hypothesis that TFP is a reliable and relevant measure of firm’s innovation capabilities, and, as such, accounts for Tobin’s q indicator. With this aim, we investigate empirically the relationship between firm level total factor productivity and the Tobin’s q. Measuring Tobin’s q allows inferring the actual value of knowledge capital from stock market valuation. We use a panel of companies listed on UK and the main continental Europe financial markets (Germany, France and Italy) for the period 1995 - 2005. Our results confirm that TFP is a reliable indicator of firm’s innovative capabilities. When we control for firm’s R&D investments, the effects of TFP on market value remain highly significant. This suggests that TFP is a broader measure of innovation capability than R&D is. The validation of the Tobin’s q and TFP relationship has important implications concerning firm’s technological innovation measurement.

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Bibliographic Info

Paper provided by University of Turin in its series Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio Carlo Alberto. WP series with number 200912.

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Length: 33 pages
Date of creation: Sep 2009
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Handle: RePEc:uto:labeco:200912

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  1. Cristiano Antonelli & Francesco Quatraro, 2010. "The Effects of Biased Technological Change on Total Factor Productivity. Empirical Evidence from a Sample of OECD Countries," Post-Print halshs-00727618, HAL.
  2. Bessen, James, 2008. "The value of U.S. patents by owner and patent characteristics," Research Policy, Elsevier, vol. 37(5), pages 932-945, June.
  3. Shane, Hilary & Klock, Mark, 1997. " The Relation between Patent Citations and Tobin's Q in the Semiconductor Industry," Review of Quantitative Finance and Accounting, Springer, vol. 9(2), pages 131-46, September.
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  7. Elena Cefis & Matteo Ciccarelli, 2005. "Profit differentials and innovation," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 14(1-2), pages 43-61.
  8. Hall, Bronwyn H. & Oriani, Raffaele, 2006. "Does the market value R&D investment by European firms? Evidence from a panel of manufacturing firms in France, Germany, and Italy," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 971-993, September.
  9. Blundell, Richard & Bond, Stephen & Devereux, Michael & Schiantarelli, Fabio, 1992. "Investment and Tobin's Q: Evidence from company panel data," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 233-257.
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Cited by:
  1. Costantini, Valeria & Mazzanti, Massimiliano & Montini, Anna, 2013. "Environmental performance, innovation and spillovers. Evidence from a regional NAMEA," Ecological Economics, Elsevier, vol. 89(C), pages 101-114.
  2. Jackie Krafft & Yiping Qu & Francesco Quatraro & Jacques-Laurent Ravix, 2013. "Corporate governance, value and performance of firms: New empirical results on convergence from a large international database," Post-Print hal-00786664, HAL.
  3. Grigorii V. Teplykh, 2014. "Innovations and productivity: the shift during the 2008 crisis," HSE Working papers WP BRP 23/STI/2014, National Research University Higher School of Economics.
  4. repec:hal:wpaper:hal-00786664 is not listed on IDEAS

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