IDEAS home Printed from https://ideas.repec.org/a/taf/apeclt/v13y2006i5p313-318.html
   My bibliography  Save this article

Valuation of patent - a real options perspective

Author

Listed:
  • Ming-Cheng Wu
  • Chun-Yao Tseng

Abstract

Both the theoretical model and the empirical analysis methods are examined for valuing patents from the real options perspective. This study not only sets up a real options approach for evaluating patent to conform to the main sensitivity analysis of patent activities, but also establishes an empirical method about valuing patents by a panel data. Cross-sectional and time-series data from 101 Taiwanese electronic firms between 1993 and 2002 are employed for the fixed effects analysis in the panel data model. This study concludes the consist results from the theoretical model and empirical analysis. That is, the patent value increases with increasing the underlying asset, time to maturity and risk-free rate.

Suggested Citation

  • Ming-Cheng Wu & Chun-Yao Tseng, 2006. "Valuation of patent - a real options perspective," Applied Economics Letters, Taylor & Francis Journals, vol. 13(5), pages 313-318.
    • Handle: RePEc:taf:apeclt:v:13:y:2006:i:5:p:313-318
    DOI: 10.1080/13504850500393477
    as

    Download full text from publisher

    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/13504850500393477&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13504850500393477?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

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

    References listed on IDEAS

    as
    1. Ernst, Holger, 2001. "Patent applications and subsequent changes of performance: evidence from time-series cross-section analyses on the firm level," Research Policy, Elsevier, vol. 30(1), pages 143-157, January.
    2. Edward F. Sherry & David J. Teece, 2008. "Royalties, evolving patent rights, and the value of innovation," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 8, pages 151-163, World Scientific Publishing Co. Pte. Ltd..
    3. Eduardo S. Schwartz, 2004. "Patents and R&D as Real Options," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 33(1), pages 23-54, February.
    4. Schankerman, Mark & Pakes, Ariel, 1986. "Estimates of the Value of Patent Rights in European Countries during the Post-1950 Period," Economic Journal, Royal Economic Society, vol. 96(384), pages 1052-1076, December.
    5. Lenos Trigeorgis, 1993. "Real Options and Interactions With Financial Flexibility," Financial Management, Financial Management Association, vol. 22(3), Fall.
    6. Bronwyn H. Hall & Adam B. Jaffe & Manuel Trajtenberg, 2000. "Market Value and Patent Citations: A First Look," NBER Working Papers 7741, National Bureau of Economic Research, Inc.
    7. Leahy, John V & Whited, Toni M, 1996. "The Effect of Uncertainty on Investment: Some Stylized Facts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 64-83, February.
    8. Sydney D. Howell & Axel J. Jägle, 1997. "Laboratory Evidence on How Managers Intuitively Value Real Growth Options," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(7‐8), pages 915-935, September.
    9. Grupp, Hariolf & Schmoch, Ulrich, 1999. "Patent statistics in the age of globalisation: new legal procedures, new analytical methods, new economic interpretation," Research Policy, Elsevier, vol. 28(4), pages 377-396, April.
    10. Sydney D. Howell & Axel J. Jägle, 1997. "Laboratory Evidence on How Managers Intuitively Value Real Growth Options," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(7&8), pages 915-935.
    11. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wu, Ming-Cheng, 2011. "Antecedents of patent value using exchange option models: Evidence from a panel data analysis," Journal of Business Research, Elsevier, vol. 64(1), pages 81-86, January.
    2. Arasteh, Abdollah, 2017. "Considering the investment decisions with real options games approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 1282-1294.
    3. Kashyap Ravi, 2020. "The Economics of Enlightenment: Time Value of Knowledge and the Net Present Value (NPV) of Knowledge Machines, A Proposed Approach Adapted from Finance," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(2), pages 1-23, April.
    4. Lee, Shun-Chung, 2011. "Using real option analysis for highly uncertain technology investments: The case of wind energy technology," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(9), pages 4443-4450.
    5. Xue Yang & Hao Zhang & Die Hu & Bingde Wu, 2023. "The timing dilemma: understanding the determinants of innovative startups’ patent collateralization for loans," Small Business Economics, Springer, vol. 60(1), pages 371-403, January.
    6. Roy Cerqueti & Marco Ventura, 2009. "A Discrete Model for Patent Valuation," ISAE Working Papers 120, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
    7. Mohd Shadab Danish & Pritam Ranjan & Ruchi Sharma, 2021. "Identification of “Valuable” Technologies via Patent Statistics in India: An Analysis Based on Renewal Information," BASE University Working Papers 13/2021, BASE University, Bengaluru, India.
    8. Kashyap Ravi, 2020. "The Economics of Enlightenment: Time Value of Knowledge and the Net Present Value (NPV) of Knowledge Machines, A Proposed Approach Adapted from Finance," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(2), pages 1-23, April.

    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. Wu, Ming-Cheng, 2011. "Antecedents of patent value using exchange option models: Evidence from a panel data analysis," Journal of Business Research, Elsevier, vol. 64(1), pages 81-86, January.
    2. Mohd Shadab Danish & Pritam Ranjan & Ruchi Sharma, 2022. "Assessing the Impact of Patent Attributes on the Value of Discrete and Complex Innovations," Papers 2208.07222, arXiv.org.
    3. Mohd Shadab Danish & Pritam Ranjan & Ruchi Sharma, 2021. "Identification of “Valuable” Technologies via Patent Statistics in India: An Analysis Based on Renewal Information," BASE University Working Papers 13/2021, BASE University, Bengaluru, India.
    4. Stefan Lachenmaier, 2005. "Identification of Available and Desirable Indicators for Patent Systems, Patenting Processes and Patent Rights Research Project for the German Patent and Trademark Office," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 25.
    5. Alkaraan, Fadi & Northcott, Deryl, 2006. "Strategic capital investment decision-making: A role for emergent analysis tools?," The British Accounting Review, Elsevier, vol. 38(2), pages 149-173.
    6. MacDougall, Shelley L. & Pike, Richard H., 2003. "Consider your options: changes to strategic value during implementation of advanced manufacturing technology," Omega, Elsevier, vol. 31(1), pages 1-15, February.
    7. Lirios Alos-Simo & Antonio J. Verdu-Jover & Jose M. Gomez-Gras, 2020. "Knowledge Transfer in Sustainable Contexts: A Comparative Analysis of Periods of Financial Recession and Expansion," Sustainability, MDPI, vol. 12(12), pages 1-24, June.
    8. Arvids A. Ziedonis, 2007. "Real Options in Technology Licensing," Management Science, INFORMS, vol. 53(10), pages 1618-1633, October.
    9. Garcia Fronti, Javier, 2015. "Modelo estocástico para la valuación de una inversión nanomédica [Nanomedical Stochastic Investment Valuation]," MPRA Paper 63948, University Library of Munich, Germany.
    10. Leila Tahmooresnejad & Catherine Beaudry, 2018. "Do patents of academic funded researchers enjoy a longer life? A study of patent renewal decisions," PLOS ONE, Public Library of Science, vol. 13(8), pages 1-22, August.
    11. Hagedoorn, John & Cloodt, Myriam, 2003. "Measuring innovative performance: is there an advantage in using multiple indicators?," Research Policy, Elsevier, vol. 32(8), pages 1365-1379, September.
    12. Christine Greenhalgh & Padraig Dixon, 2002. "The Economics of Intellectual Property: A Review to Identify Themes for Future Research," Economics Series Working Papers 135, University of Oxford, Department of Economics.
    13. Driouchi, Tarik & Trigeorgis, Lenos & So, Raymond H.Y., 2020. "Individual antecedents of real options appraisal: The role of national culture and ambiguity," European Journal of Operational Research, Elsevier, vol. 286(3), pages 1018-1032.
    14. Marco, Alan C., 2005. "Learning by Suing: Structural Estimates of Court Errors in Patent Litigation," Vassar College Department of Economics Working Paper Series 68, Vassar College Department of Economics.
    15. Christian Sternitzke, 2009. "Defining triadic patent families as a measure of technological strength," Scientometrics, Springer;Akadémiai Kiadó, vol. 81(1), pages 91-109, October.
    16. San–Lin Chung & Mark B. Shackleton, 2007. "Generalised Geske‐‐Johnson Interpolation of Option Prices," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(5‐6), pages 976-1001, June.
    17. Turvey, Calum G. & Toole, Andrew A. & Kropp, Jaclyn D., 2007. "An Empirical Examination of the Relationship Between Real Options Values and the Rate of Investment," 2007 1st Forum, February 15-17, 2007, Innsbruck, Austria 6606, International European Forum on System Dynamics and Innovation in Food Networks.
    18. Harhoff, Dietmar & Scherer, Frederic M. & Vopel, Katrin, 2003. "Citations, family size, opposition and the value of patent rights," Research Policy, Elsevier, vol. 32(8), pages 1343-1363, September.
    19. Chang, Ke-Chiun & Chen, Dar-Zen & Huang, Mu-Hsuan, 2012. "The relationships between the patent performance and corporation performance," Journal of Informetrics, Elsevier, vol. 6(1), pages 131-139.
    20. Hyunseok Park & Janghyeok Yoon & Kwangsoo Kim, 2013. "Identification and evaluation of corporations for merger and acquisition strategies using patent information and text mining," Scientometrics, Springer;Akadémiai Kiadó, vol. 97(3), pages 883-909, December.

    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:taf:apeclt:v:13:y:2006:i:5:p:313-318. See general information about how to correct material in RePEc.

    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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEL20 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.