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Exploring the patent explosion

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  • Bronwyn Hall

Abstract

This paper looks more closely at the sources of patent growth in the United States since 1984. It confirms that the increase is largely due to US patenters, with an earlier surge in Asia, and some increase in Europe. Growth has taken place in all technologies, but not in all industries, being concentrated in the electrical, electronics, computing, and scientific instruments industries. It then examines whether these patents are valued by the market. We know from survey evidence that patents in these industries are not usually considered important for appropriability, but are sometimes considered necessary to secure financing for entering the industry. I compare the market value of patents held by entrant firms to those held by incumbents (controlling for R&D). Using data on publicly traded firms 1980-1989, I find that in industries based on electrical and mechanical technologies the market value of entrantsÕ patents is positive in the post-1984 period (after the patenting surge), but not before, when patents were relatively unimportant in these industries. Also, the value of patent rights in complex product industries (where each product relies on many patents held by a number of other firms) is much higher for entrants than incumbents in the post-1984 period. For discrete product industries (where each product relies on only a few patents, and where the importance of patents for appropriability has traditionally been higher), there is no difference between incumbents and entrants.

Suggested Citation

  • Bronwyn Hall, 2004. "Exploring the patent explosion," Working Papers wp291, Centre for Business Research, University of Cambridge.
  • Handle: RePEc:cbr:cbrwps:wp291
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    References listed on IDEAS

    as
    1. 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.
    2. Bronwyn H. Hall & Adam B. Jaffe & Manuel Trajtenberg, 2001. "The NBER Patent Citation Data File: Lessons, Insights and Methodological Tools," NBER Working Papers 8498, National Bureau of Economic Research, Inc.
    3. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1987. "Appropriating the Returns from Industrial Research and Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3, Specia), pages 783-832.
    4. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
    5. Jinyoung Kim & Gerald Marschke, 2004. "Accounting for the recent surge in U.S. patenting: changes in R&D expenditures, patent yields, and the high tech sector," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(6), pages 543-558.
    6. Lichtenberg, Frank R & Griliches, Zvi, 1989. "Errors of Measurement in Output Deflators," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(1), pages 1-9, January.
    7. Kortum, Samuel & Lerner, Josh, 1998. "Stronger protection or technological revolution: what is behind the recent surge in patenting?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 247-304, June.
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    More about this item

    Keywords

    patents; market value; information technology; appropriability;
    All these keywords.

    JEL classification:

    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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