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The Impact of Patenting Activity on the Financial Performance of Malaysian Firms

Author

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  • Farha Ghapar
  • Robert Brooks
  • Russell Smyth

Abstract

This study analyzes the relationship between patenting activity and financial performance at the Malaysian firm level for firms that have been granted patents in Malaysia and the United States of America. We adopt the patent renewal and profit maximization model as our theoretical underpinning for this study. The patenting activity variables are measured based on the patent renewal system and the financial performance variables are measured based on the profit margin. The sample is divided into manufacturing and non-manufacturing firms. We utilize a panel dataset spanning from 1994 to 2008 and the model is estimated using panel least squares, fixed effects, random effects and generalized method of moments with various types of effects specifications and transformations. The key finding from the empirical study is that there is a significant relationship between patenting activity and financial performance at the Malaysian firm level, but that the impact is rather small and that the signs on the coefficients are mixed. This result may reflect the level of competition that the firms faced over the period of the study, even though patenting is well known for giving firms some monopoly power.

Suggested Citation

  • Farha Ghapar & Robert Brooks & Russell Smyth, 2013. "The Impact of Patenting Activity on the Financial Performance of Malaysian Firms," Monash Economics Working Papers 22-13, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2013-22
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2013/index.html
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    Keywords

    Patenting; patent renewal; firm financial performance; panel data model;

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