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Measuring the impact of innovation on firm value: a new approach

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  • Kraft, Kornelius
  • Czarnitzki, Dirk

Abstract

Most of the existing empirical literature on the relationship of firm value and knowledge capital is based on the stock market valuation of companies. However, the assets of many firms are not publicly traded, and hence the calculation of market value is limited to a subsample of firms. We suggest to use a credit rating score instead and present an empirical analysis. It turns out that innovative firms, i.e. those with a reasonable knowledge stock, have a better credit rating and thus, as we propose, a higher value. However, too much of innovative activi-ties is seen as risky and the firm value decreases. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 02-73.

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Date of creation: 2002
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Handle: RePEc:zbw:zewdip:532

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Related research

Keywords: Firm Value; Credit Rating; Innovation; Intellectual Property Discrete Regression Models;

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  1. Hall, Bronwyn H. & Jaffe, Adam & Trajtenberg, Manuel, 2001. "Market Value and Patent Citations: A First Look," Department of Economics, Working Paper Series qt8vh1c20f, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  2. Hall, Bronwyn H., 1999. "Innovation and Market Value," Department of Economics, Working Paper Series qt9f31v1rw, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. Adam B. Jaffe, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits and Market Value," NBER Working Papers 1815, National Bureau of Economic Research, Inc.
  4. Fisher, Franklin M & McGowan, John J, 1983. "On the Misuse of Accounting Rates of Return to Infer Monopoly Profits," American Economic Review, American Economic Association, vol. 73(1), pages 82-97, March.
  5. Mansfield, Edwin, et al, 1977. "Social and Private Rates of Return from Industrial Innovations," The Quarterly Journal of Economics, MIT Press, vol. 91(2), pages 221-40, May.
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Cited by:
  1. Bronwyn Hall, 2006. "R&D, productivity and market value," IFS Working Papers W06/23, Institute for Fiscal Studies.

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