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Measuring Innovation with Patents when Patenting is Strategic

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  • Jonathan F. Lee

Abstract

I model a firm's decision to create an invention and, separately, her decision to protect that invention with intellectual property (IP). Because external forces, such as industry characteristics or policy regimes, can affect the innovation and protection decisions differently, the model predicts that innovation measures based on IP usage, such as patent counts, may not correlate with innovative effort. For example, the threat of competition generally has an inverse-U shaped relationship with observed patenting but has a normal-U relationship with innovative effort. In this case, the average quality of a firm's patent portfolio is a better proxy for innovation. I derive general conditions under which various patent statistics, such as quality-adjusted patenting or average patent quality, are useful proxies for how innovation responds to external influences.

Suggested Citation

  • Jonathan F. Lee, 2017. "Measuring Innovation with Patents when Patenting is Strategic," 2017 Papers ple823, Job Market Papers.
  • Handle: RePEc:jmp:jm2017:ple823
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    References listed on IDEAS

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    1. Manuel Trajtenberg, 1990. "A Penny for Your Quotes: Patent Citations and the Value of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 172-187, Spring.
    2. Zhang, Tianle, 2012. "Patenting in the shadow of independent discoveries by rivals," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 41-49.
    3. Elisabetta Ottoz & Franco Cugno, 2008. "Patent--Secret Mix in Complex Product Firms," American Law and Economics Review, Oxford University Press, vol. 10(1), pages 142-158.
    4. Emeric Henry & Francisco Ruiz-Aliseda, 2016. "Keeping Secrets: The Economics of Access Deterrence," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 95-118, August.
    5. Vincenzo Denicolo & Luigi Alberto Franzoni, 2004. "Patents, Secrets, and the First-Inventor Defense," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(3), pages 517-538, September.
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    More about this item

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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