Patents, R and D, and the Stock Market Rate of Return
The purpose of this paper is to present and estimate a model which allows one to use the recently computerized U.S. Patent Office's data base to identify when and where changes in inventive output have occurred. The model assumes a firm which chooses a research strategy to maximize the expected discounted value of the net cash flows from its activities, and a stock market that evaluates this expectation at different dates (it is a version of the Lucas-Prescott, 1971, investment model). Patents are taken as an indicator of the output of the firm's research laboratories. These assumptions place a set of testable restrictions on the stochastic process generating patents, R&D, and the stock market rate of return on the firm's equity (the econometric framework used is that of a restricted index, or dynamic factor-analysis model [Sargent and Sims, 1977; Geweke, 1977b]). The data contain observations on these three variables for 120 firms over an eight year period. The model fits these data quite well and the final section reports on the implications of the parameter estimates.
|Date of creation:||Oct 1981|
|Date of revision:|
|Publication status:||published as Pakes, Ariel. "Patents, R&D, and the Stock Market Rate of Return: A Summaryof Some Empirical Results." R&D, Patents and Productivity, edited by Zvi Griliches, (1984).|
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- Ariel Pakes & Mark Schankerman, 1980.
"An Exploration into the Determinants of Research Intensity,"
NBER Working Papers
0438, National Bureau of Economic Research, Inc.
- Ariel Pakes & Mark Schankerman, 1984. "An Exploration into the Determinants of Research Intensity," NBER Chapters, in: R&D, Patents, and Productivity, pages 209-232 National Bureau of Economic Research, Inc.
- Pakes, Ariel & Schankerman, Mark, 1980. "An Exploration Into the Determinants of Research Intensity," Working Papers 80-02, C.V. Starr Center for Applied Economics, New York University.
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- Zvi Griliches, 1979.
"Issues in Assessing the Contribution of Research and Development to Productivity Growth,"
Bell Journal of Economics,
The RAND Corporation, vol. 10(1), pages 92-116, Spring.
- Zvi Griliches, 1998. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 17-45 National Bureau of Economic Research, Inc.
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