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Research Productivity and Patent Quality: Measurement with Multiple Indicators

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  • Jean Olson Lanjouw
  • Mark Schankerman

Abstract

We analyse the determinants of the decline in measured research productivity (the patent/R&D ratio)using panel data on manufacturing firms in the U.S. for the period 1980-93. We focus on three factors: the level of demand, the quality of patents, and technological exhaustion. We first develop an index of patent 'quality' using detailed information on patents in the U.S. in seven technology fields. Using a factor model, we construct a minimum-variance index based on four patent characteristics and show that using multiple indicators substantially reduces the measured variance in quality. We then show that research productivity at the firm level is negatively related to the patent quality index and the level of demand, as predicted by an optimizing model of R&D, and positively related to the stock market valuation of patented innovations held by firms.

Suggested Citation

  • Jean Olson Lanjouw & Mark Schankerman, 2002. "Research Productivity and Patent Quality: Measurement with Multiple Indicators," STICERD - Economics of Industry Papers 32, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  • Handle: RePEc:cep:stieip:32
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    References listed on IDEAS

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    1. Lanjouw, Jean O & Schankerman, Mark, 2001. "Characteristics of Patent Litigation: A Window on Competition," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 129-151, Spring.
    2. Adam Jaffe & Manuel Trajtenberg, 1999. "International Knowledge Flows: Evidence From Patent Citations," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 8(1-2), pages 105-136.
    3. 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.
    4. Bronwyn H. Hall & Zvi Griliches & Jerry A. Hausman, 1984. "Patents and R&D: Is There A Lag?," NBER Working Papers 1454, National Bureau of Economic Research, Inc.
    5. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters,in: R&D and Productivity: The Econometric Evidence, pages 287-343 National Bureau of Economic Research, Inc.
    6. Zvi Griliches, 1998. "Productivity, R&D, and the Data Constraint," NBER Chapters,in: R&D and Productivity: The Econometric Evidence, pages 347-374 National Bureau of Economic Research, Inc.
    7. Evenson, Robert E, 1993. "Patents, R&D, and Invention Potential: International Evidence," American Economic Review, American Economic Association, vol. 83(2), pages 463-468, May.
    8. 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.
    9. 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.
    10. Tong, Xuesong & Frame, J. Davidson, 1994. "Measuring national technological performance with patent claims data," Research Policy, Elsevier, vol. 23(2), pages 133-141, March.
    11. repec:fth:harver:1473 is not listed on IDEAS
    12. Bronwyn H. Hall, 1993. "Industrial Research during the 1980s: Did the Rate of Return Fall?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2 Microec), pages 289-343.
    13. Robert Evenson, 1984. "International Invention: Implications for Technology Market Analysis," NBER Chapters,in: R&D, Patents, and Productivity, pages 89-126 National Bureau of Economic Research, Inc.
    14. Ricardo J. Caballero & Adam B. Jaffe, 1993. "How High are the Giants' Shoulders: An Empirical Assessment of Knowledge Spillovers and Creative Destruction in a Model of Economic Growth," NBER Chapters,in: NBER Macroeconomics Annual 1993, Volume 8, pages 15-86 National Bureau of Economic Research, Inc.
    15. Kortum, Samuel, 1993. "Equilibrium R&D and the Patent-R&D Ratio: U.S. Evidence," American Economic Review, American Economic Association, vol. 83(2), pages 450-457, May.
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    Keywords

    Patents; R&D productivity; technological exhaustion.;

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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