IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v78y1988i2p419-23.html
   My bibliography  Save this article

Industry Effects and Appropriability Measures in the Stock Market's Valuation of R&D and Patents

Author

Listed:
  • Cockburn, Iain
  • Griliches, Zvi

Abstract

This paper examines the stock market's valuation of a firm's innovative activity. We estimate the market's relative valuation of firms' tangible and intangible assets, focusing on knowledge capital in the form of accumulated "stocks" of R&D and patents. We tried to improve upon our estimates of the stock market's valuation of knowledge capital embodied in such "stocks" by bringing in measures of the appropriability environment facing a firm from the Yale Survey on Industrial Research and Development. The responses to Survey questions about the effectiveness of patents as a mechanism for protecting the returns from innovation turn out to be of some use: there is evidence of an interaction between industry level measures of the effectiveness of patents and the market's valuation of a firm's past R&D and patenting performance, as well as its current R&D moves. We find no evidence, however, that other appropriability mechanisms differ enough across industries to leave measurable traces in our data. The structure of the Yale Survey makes it possible to estimate the sampling error in the appropriability measures derived from it. This information was used by us in an errors-in-variables context, but with little success. In the absence of R&D variables, our estimates imply that a two standard deviation increase in our index of patent effectiveness would raise the value of a patent held by our average firm from $0.4 million to $1.0 million. When R&D variables are introduced into the equations, the patents variables become insignificant - R&D expenditures are a better measure of input to the innovative function of firms than patents are of its output - but we estimate that the same experiment would induce changes in q of between 10 and 27 percent for the average firm, approximately doubling the market's valuation of this kind of capital.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Cockburn, Iain & Griliches, Zvi, 1988. "Industry Effects and Appropriability Measures in the Stock Market's Valuation of R&D and Patents," American Economic Review, American Economic Association, vol. 78(2), pages 419-423, May.
    • Handle: RePEc:aea:aecrev:v:78:y:1988:i:2:p:419-23
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0002-8282%28198805%2978%3A2%3C419%3AIEAAMI%3E2.0.CO%3B2-6&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bronwyn H. Hall & Clint Cumminq & Elizabeth S. Laderman & Joy Mundy, 1988. "The R&D Master File Documentation," NBER Technical Working Papers 0072, National Bureau of Economic Research, Inc.
    2. Zvi Griliches, 1984. "Market Value, R&D, and Patents," NBER Chapters, in: R&D, Patents, and Productivity, pages 249-252, National Bureau of Economic Research, Inc.
    3. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
    4. Levin, Richard C & Cohen, Wesley M & Mowery, David C, 1985. "R&D Appropriability, Opportunity, and Market Structure: New Evidence on Some Schumpeterian Hypotheses," American Economic Review, American Economic Association, vol. 75(2), pages 20-24, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chang-Yang Lee & Ji-Hwan Lee & Ajai S. Gaur, 2017. "Are large business groups conducive to industry innovation? The moderating role of technological appropriability," Asia Pacific Journal of Management, Springer, vol. 34(2), pages 313-337, June.
    2. McGahan, Anita M. & Silverman, Brian S., 2006. "Profiting from technological innovation by others: The effect of competitor patenting on firm value," Research Policy, Elsevier, vol. 35(8), pages 1222-1242, October.
    3. Feng, Ping & Ke, Shanzi, 2016. "Self-selection and performance of R&D input of heterogeneous firms: Evidence from China's manufacturing industries," China Economic Review, Elsevier, vol. 41(C), pages 181-195.
    4. Paul H. Jensen & Elizabeth Webster, 2004. "Examining Biases in Measures of Firm Innovation," Melbourne Institute Working Paper Series wp2004n10, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    5. William Griffiths & Elizabeth Webster, 2004. "The Determinants of Research and Development and Intellectual Property Usage among Australian Companies, 1989 to 2002," Melbourne Institute Working Paper Series wp2004n27, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    6. Bronwyn H. Hall, 1988. "The Effect of Takeover Activity on Corporate Research and Development," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 69-100, National Bureau of Economic Research, Inc.
    7. Hall, Bronwyn H, 1987. "The Relationship between Firm Size and Firm Growth in the U.S. Manufacturing Sector," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 583-606, June.
    8. Alka Chadha & Raffaele Oriani, 2010. "R&D market value under weak intellectual property rights protection: the case of India," Scientometrics, Springer;Akadémiai Kiadó, vol. 82(1), pages 59-74, January.
    9. Mejia, Paula & Meléndez Arjona, Marcela, 2018. "Middle-Class Entrepreneurs and Social Mobility through Entrepreneurship in Colombia," IDB Publications (Working Papers) 4082, Inter-American Development Bank.
    10. Inmaculada García-Mainar & Víctor M. Montuenga-Gómez, 2017. "Subjective educational mismatch and signalling in Spain," Documentos de Trabajo dt2017-03, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
    11. Crass, Dirk & Garcia Valero, Francisco & Pitton, Francesco & Rammer, Christian, 2016. "Protecting innovation through patents and trade secrets: Determinants and performance impacts for firms with a single innovation," ZEW Discussion Papers 16-061, ZEW - Leibniz Centre for European Economic Research.
    12. Xuejun Wang & Aiting Shen & Zhiyong Chen & Shuhe Hu, 2015. "Complete convergence for weighted sums of NSD random variables and its application in the EV regression model," TEST: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 24(1), pages 166-184, March.
    13. Maïlys Korber, 2019. "Does Vocational Education Give a Labour Market Advantage over the Whole Career? A Comparison of the United Kingdom and Switzerland," Social Inclusion, Cogitatio Press, vol. 7(3), pages 202-223.
    14. Frey, Rainer & Hussinger, Katrin, 2006. "The role of technology in M&As: a firm-level comparison of cross-border and domestic deals," Discussion Paper Series 1: Economic Studies 2006,45, Deutsche Bundesbank.
    15. E. C. Mamatzakis, 2010. "The contribution of the publicly-funded R&D capital to productivity growth and an application to the Greek food and beverages industry," International Review of Applied Economics, Taylor & Francis Journals, vol. 24(4), pages 483-494.
    16. Aamir Rafique Hashmi & Johannes Van Biesebroeck, 2016. "The Relationship between Market Structure and Innovation in Industry Equilibrium: A Case Study of the Global Automobile Industry," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 192-208, March.
    17. Sebastian Devlin-Foltz & John Sabelhaus, 2015. "Heterogeneity in Economic Shocks and Household Spending," Finance and Economics Discussion Series 2015-49, Board of Governors of the Federal Reserve System (U.S.).
    18. Chang, Sungyong & Kim, Hyunseob & Song, Jaeyong & Lee, Keun, 2021. "Dynamics of Imitation versus Innovation in Technological Leadership Change: Latecomers’ Catch-up Strategies in Diverse Technological Regimes," SocArXiv b8fae, Center for Open Science.
    19. López, Alberto, 2012. "Productivity effects of ICTs and organizational change: A test of the complementarity hypothesis in Spain," MPRA Paper 40400, University Library of Munich, Germany.
    20. Banal-Estañol, Albert & Duso, Tomaso & Seldeslachts, Jo & Szücs, Florian, 2022. "R&D spillovers through RJV cooperation," Research Policy, Elsevier, vol. 51(4).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:78:y:1988:i:2:p:419-23. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.