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Innovations, Patents and Cash Flow

Author

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  • Geroski, Paul A
  • Van Reenen, John
  • Samiei, Hossein

Abstract

In this paper we estimate a dynamically recursive model of the relationship between innovations, patents and cash flow. Our results suggest that: (i) lagged patents are significant predictors of current innovation, but lagged innovations do not affect the conditional expectation of current patents; (ii) patents are influenced primarily by advances in the science base as measured by R&D intensity and spillovers, while innovations are more sensitive to cash flow and demand shocks; (iii) innovations have a greater impact on cash flow than patents; and (iv) both patents and innovations show strong history dependence. We use our model to simulate the effects of spending £500m on any one of three different types of traditional government policies designed to support innovative activities of firms (non-discretionary R&D subsidies, cuts in corporate tax and stimulation of macroeconomic demand growth). These simulations suggest that the role for state intervention in promoting technological advance is decidedly limited.

Suggested Citation

  • Geroski, Paul A & Van Reenen, John & Samiei, Hossein, 1996. "Innovations, Patents and Cash Flow," CEPR Discussion Papers 1432, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:1432
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    Keywords

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    JEL classification:

    • N2 - Economic History - - Financial Markets and Institutions
    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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