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Valuation of innovation: The case of iPhone

  • Korkeamäki, Timo


    (Hanken School of Economics and Bank of Finland)

  • Takalo, Tuomas


    (Bank of Finland Research)

We study the value of innovation in a case study of one of the most visible innovative products in recent years, Apple’s iPhone. The value effects of news announcements, patent publications, and trademarks relating to iPhone are taken into account. Our estimate of the lower bound on the value of iPhone is fairly high, 30 billion U.S. (event-day) dollars or 10% to 13% of the firm’s market cap (at the end of 2009). We find that patentable technology explains about 25% of the total value, which derives from market reactions to publication of patent applications rather than grants. We also observe a weak negative reaction among Apple’s rivals to news about iPhone. Apple appears to capture most of the value within the iPhone supply chain.

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Paper provided by Bank of Finland in its series Research Discussion Papers with number 24/2012.

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Length: 40 pages
Date of creation: 17 Jul 2012
Date of revision:
Handle: RePEc:hhs:bofrdp:2012_024
Contact details of provider: Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
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  1. Ali-Yrkkö, Jyrki & Rouvinen, Petri & Seppälä, Timo & Ylä-Anttila, Pekka, 2011. "Who Captures Value in Global Supply Chains? Case Nokia N95 Smartphone," Discussion Papers 1240, The Research Institute of the Finnish Economy.
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  9. Klaus Kultti & Tuomas Takalo & Juuso Toikka, 2006. "Simultaneous Model of Innovation, Secrecy, and Patent Policy," American Economic Review, American Economic Association, vol. 96(2), pages 82-86, May.
  10. Bronwyn H. Hall & Grid Thoma & Salvatore Torrisi, 2009. "Financial Patenting in Europe," NBER Working Papers 14714, National Bureau of Economic Research, Inc.
  11. Chaney, Paul K & Devinney, Timothy M & Winer, Russell S, 1991. "The Impact of New Product Introductions on the Market Value of Firms," The Journal of Business, University of Chicago Press, vol. 64(4), pages 573-610, October.
  12. Nicholas Bloom & John Van Reenen, 2002. "Patents, Real Options and Firm Performance," Economic Journal, Royal Economic Society, vol. 112(478), pages C97-C116, March.
  13. Karan Girotra & Christian Terwiesch & Karl T. Ulrich, 2007. "Valuing R& D Projects in a Portfolio: Evidence from the Pharmaceutical Industry," Management Science, INFORMS, vol. 53(9), pages 1452-1466, September.
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  15. Bronwyn H. Hall & Adam Jaffe & Manuel Trajtenberg, 2005. "Market Value and Patent Citations," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 16-38, Spring.
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