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Invention Value, Inventive Capability and the Large Firm Advantage

Author

Listed:
  • Ashish Arora
  • Wesley M. Cohen
  • Honggi Lee
  • Divya Sebastian

Abstract

Do large firms produce more valuable inventions, and if so, why? After confirming that large firms indeed produce more valuable inventions, we consider two possible sources: a superior ability to invent, or a superior ability to extract value from their inventions. We develop a simple model that discriminates between the two explanations. Using a sample of 2,786 public corporations, and measures of both patent quality and patent value, we find that, while average invention value rises with size, average invention quality declines, suggesting, per our model, that the large firm advantage is not due to superior inventive capability, but due to the superior ability to extract value. We provide evidence suggesting that this superior ability to extract value is due to greater commercialization capabilities of larger firms.

Suggested Citation

  • Ashish Arora & Wesley M. Cohen & Honggi Lee & Divya Sebastian, 2022. "Invention Value, Inventive Capability and the Large Firm Advantage," NBER Working Papers 30354, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30354
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    Cited by:

    1. Wang, P.E.N.G.F.E.I., 2024. "Pricing innovation: The anchoring effect in patent valuation," Technovation, Elsevier, vol. 136(C).
    2. Fabian Gaessler & Dietmar Harhoff & Stefan Sorg & Georg von Graevenitz, 2025. "Patents, Freedom to Operate, and Follow-on Innovation: Evidence from Post-Grant Opposition," Management Science, INFORMS, vol. 71(2), pages 1315-1334, February.
    3. Li, Lanhua & Xin, Daqi & Yang, Xi & Yu, Xiaodan, 2025. "How does patent portfolio structure affect patent value in different technological environments? Evidence from Chinese high-tech industries," Technological Forecasting and Social Change, Elsevier, vol. 215(C).
    4. Xiaosheng Ju & Shengjun Jiang & Yuxuan Hu, 2025. "Corporate basic research and technological capabilities: Evidence from China," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 33(2), pages 275-304, April.
    5. Mendonça, Sandro & Silva, Eduardo & Damásio, Bruno, 2025. "The knowledge base of Big Tech: Research as a source of informational leadership by the dominant US digital platforms," Telecommunications Policy, Elsevier, vol. 49(7).
    6. He, Siyi & Jin, Qinglu & Wu, Sirui, 2025. "The real effect of shadow banking regulation on corporate innovation: Evidence from conduit business," Pacific-Basin Finance Journal, Elsevier, vol. 90(C).
    7. Castaneda, Monica & Herrera, Milton M. & Méndez-Morales, Alberto, 2023. "A simulation-based approach for assessing the innovation barriers in the manufacturing firms," Technology in Society, Elsevier, vol. 75(C).
    8. Kox, Henk L.M., 2023. "Testing an extended knowledge-capital model of foreign direct investment," MPRA Paper 117266, University Library of Munich, Germany.
    9. Papageorgiadis, Nikolaos & Procopiou, Andreas & Sofka, Wolfgang, 2023. "Unintended consequences of outcome based compensation – How CEO bonuses, stocks and stock options affect their firms' patent litigation," Research Policy, Elsevier, vol. 52(8).
    10. Ardito, Lorenzo & Miroshnychenko, Ivan & Messeni Petruzzelli, Antonio & De Massis, Alfredo, 2025. "Family CEO and radical innovation: A stewardship perspective," Research Policy, Elsevier, vol. 54(1).
    11. Dong, Yao & Xia, Yuhuan & Qi, Xin, 2025. "Technology yields spoils: The impact of digitalization on innovation value appropriation," Technological Forecasting and Social Change, Elsevier, vol. 213(C).
    12. Wang, Yinghuan & Zhang, Jingjing & Yan, Yan & Guan, Jiancheng, 2024. "The bidirectional causality of tie stability and innovation performance," Research Policy, Elsevier, vol. 53(10).
    13. Wang, Fang, 2024. "Does the recombination of distant scientific knowledge generate valuable inventions? An analysis of pharmaceutical patents," Technovation, Elsevier, vol. 130(C).
    14. Lan, Lan & Zhou, Zhifang, 2024. "Complementary or substitutive effects? The duality of digitalization and ESG on firm's innovation," Technology in Society, Elsevier, vol. 77(C).
    15. Dejian Yu & Bo Xiang, 2025. "Customized integrated decision model for CBEC enterprise credit evaluation: The fusion of multi-source features and machine learning," Electronic Markets, Springer;IIM University of St. Gallen, vol. 35(1), pages 1-19, December.
    16. Yongjie Zhang & Qiaoran Meng & Dayong Liu, 2024. "Venture capital and technology commercialization: evidence from China," The Journal of Technology Transfer, Springer, vol. 49(6), pages 2336-2388, December.
    17. Michele Battisti & Filippo Belloc & Massimo Del Gatto, 2023. "COVID-19, Innovative Firms and Resilience," WIPO Economic Research Working Papers 73, World Intellectual Property Organization - Economics and Statistics Division.
    18. Shanshan Wang & Hongyan Zhou & Tianyi Zhao, 2024. "Configuration paths to high-value patents: evidence from patents winning the China Patent Awards," Scientometrics, Springer;Akadémiai Kiadó, vol. 129(5), pages 2633-2658, May.
    19. Lee, Honggi, 2023. "The heterogeneous effects of patent scope on licensing propensity," Research Policy, Elsevier, vol. 52(3).
    20. Patel, Pankaj C. & Guedes, Maria João, 2025. "Come and take it: Patenting pedigree and tenacity, takeover defenses, and patent valuation in post-IPO firms," Journal of Business Research, Elsevier, vol. 186(C).

    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • 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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