Running to Stand Still? - The Value of R&D, Patents and Trade Marks in Innovating Manufacturing Firms

We have constructed a novel panel dataset of UK manufacturing firms to examine how innovation, proxied by R&D and intellectual property (IP, covering both patents and trade marks), increases firm performance, as measured by firm net output (value added). Knowledge has public good characteristics of non-depletability and non-excludability. So, even with protection using intellectual property to exclude, imitation and inventing around novel products and processes is possible by competitors. We examine the size and duration of benefits to doing R&D and obtaining IP protection through both patents and trade marks. If non-depletability within the firm is correct, this implies that their absolute R&D effort and total IP assets are important. We examine this hypothesis against the alternative of depletability, where innovative intensity relative to firm size matters. Also if IP offers only weak protection against competition, then the duration of returns to these intangible assets will be short. The empirical results support depletability within firms and poor ability to exclude imitation, which implies that firms have to continually renew their portfolios of R&D-created knowledge and their IP assets to maintain their position in the market. Splitting the sample into industries designated as 'high' and 'low' technology, suggests a higher intensity of competition in high-technology sectors, as an increase in the intensity of patents and trade marks commands no premium in this sector, although persistent differences between firms are positively affected by whether or not firms are acquiring these IP assets.