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Patent quality, cumulative innovation and market value: Evidence from Japanese firm level panel data


  • Nagaoka, Sadao


We examine empirically how patent quality in terms of forward citation and science linkage affect the market value of a firm. We find that both indicators affect the market value of a firm significantly even if we extensively control the effects of the other major determinants of the market value, including R&D investment and current return on asset. In addition, the forward citation affects the market value more in cumulative innovation area such as in IT, consistent with a theoretical proposition that the value of having a dependent patent is larger in the industry where innovation is cumulative among firms.

Suggested Citation

  • Nagaoka, Sadao, 2005. "Patent quality, cumulative innovation and market value: Evidence from Japanese firm level panel data," IIR Working Paper 05-06, Institute of Innovation Research, Hitotsubashi University.
  • Handle: RePEc:hit:iirwps:05-06
    Note: Presented to the Conference on IT Innovation, Tokyo, December 2004.

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    References listed on IDEAS

    1. Romain, Astrid & Pottelsberghe de la Potterie, Bruno van, 2003. "The Economic Impact of Venture Capital," IIR Working Paper 03-20, Institute of Innovation Research, Hitotsubashi University.
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    5. Jeng, Leslie A. & Wells, Philippe C., 2000. "The determinants of venture capital funding: evidence across countries," Journal of Corporate Finance, Elsevier, vol. 6(3), pages 241-289, September.
    6. José Martí Pellón & Marina Balboa, 2001. "Determinants Of Private Equity Fundraising In Western Europe," Working Papers. Serie AD 2001-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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    8. Thomas Hellmann & Manju Puri, 2002. "Venture Capital and the Professionalization of Start-Up Firms: Empirical Evidence," Journal of Finance, American Finance Association, vol. 57(1), pages 169-197, February.
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    10. Hellmann, Thomas & Puri, Manju, 2000. "The Interaction between Product Market and Financing Strategy: The Role of Venture Capital," Review of Financial Studies, Society for Financial Studies, vol. 13(4), pages 959-984.
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    Cited by:

    1. repec:spr:scient:v:92:y:2012:i:3:d:10.1007_s11192-011-0612-6 is not listed on IDEAS
    2. Sebastien Lechevalier & Yukio Ikeda & Junichi Nishimura, 2006. "Collaborative R&D in the robot technology in Japan: an inquiry based on patent data analysis (1991-2004)," CIRJE F-Series CIRJE-F-453, CIRJE, Faculty of Economics, University of Tokyo.
    3. Fukugawa, Nobuya, 2012. "Impacts of intangible assets on the initial public offering of biotechnology startups," Economics Letters, Elsevier, vol. 116(1), pages 83-85.
    4. Cassiman, Bruno & Veugelers, Reinhilde & Zuniga, Pluvia, 2007. "Science linkages and innovation performance: An analysis on CIS-3 firms in Belgium," IESE Research Papers D/671, IESE Business School.

    More about this item


    patent quality; market value; forward citation; science linkage; cumulative innovation;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • 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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