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The Quality of Ideas: Measuring Innovation with Multiple Indicators

  • Jean O. Lanjouw
  • Mark Schankerman
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    We model early expectations about the value and technological importance ('quality') of a patented innovation as a latent variable common to a set of four indicators: the number of patent claims, forward citations, backward citations and family size. The model is estimated for four technology areas using a sample of about 8000 U.S. patents applied for during 1960-91. We measure how much noise' each individual indicator contains and construct a more informative, composite measure of quality. The variance in quality', conditional on the four indicators, is just one-third of the unconditional variance. We show the variance reduction generated by subsets of indicators, and find forward citations to be particularly important. Our measure of quality is significantly related to subsequent decisions to renew a patent and to litigate infringements. Using patent and R&D data for 100 U.S. manufacturing firms, we find that adjusting for quality removes much of the apparent decline in research productivity (patent counts per R&D) observed at the aggregate level.

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    File URL: http://www.nber.org/papers/w7345.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7345.

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    Date of creation: Sep 1999
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    Publication status: published as Lanjouw, Jean O. and Mark Schankerman. "Patent Quality And Research Productivity: Measuring Innovation With Multiple Indicators," Economic Journal, 2004, v114(495,Apr), 441-465.
    Handle: RePEc:nbr:nberwo:7345
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    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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    1. Austin, David H, 1993. "An Event-Study Approach to Measuring Innovative Output: The Case of Biotechnology," American Economic Review, American Economic Association, vol. 83(2), pages 253-58, May.
    2. Zvi Griliches, 1990. "Patent Statistics as Economic Indicators: A Survey," NBER Working Papers 3301, National Bureau of Economic Research, Inc.
    3. Mark Schankerman, 1998. "How Valuable is Patent Protection? Estimates by Technology Field," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 77-107, Spring.
    4. Ariel Pakes & Mark Schankerman, 1984. "The Rate of Obsolescence of Patents, Research Gestation Lags, and the Private Rate of Return to Research Resources," NBER Chapters, in: R&D, Patents, and Productivity, pages 73-88 National Bureau of Economic Research, Inc.
    5. Ariel Pakes, 1986. "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks," NBER Working Papers 1340, National Bureau of Economic Research, Inc.
    6. Harhoff, Dietmar & Scherer, Frederic M. & Vopel, Katrin, 2003. "Citations, family size, opposition and the value of patent rights," Research Policy, Elsevier, vol. 32(8), pages 1343-1363, September.
    7. Pakes, Ariel & Schankerman, Mark A., 1978. "The Rate of Obsolescence of Knowledge, Research Gestation Labs, and the Private Rate of Return to Research Resources," Working Papers 78-13, C.V. Starr Center for Applied Economics, New York University.
    8. repec:fth:harver:1473 is not listed on IDEAS
    9. Tong, Xuesong & Frame, J. Davidson, 1994. "Measuring national technological performance with patent claims data," Research Policy, Elsevier, vol. 23(2), pages 133-141, March.
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