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The Quality of Ideas: Measuring Innovation with Multiple Indicators

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  • Jean O. Lanjouw
  • Mark Schankerman

Abstract

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.

Suggested Citation

  • Jean O. Lanjouw & Mark Schankerman, 1999. "The Quality of Ideas: Measuring Innovation with Multiple Indicators," NBER Working Papers 7345, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:7345
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    1. repec:fth:harver:1473 is not listed on IDEAS
    2. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters,in: R&D and Productivity: The Econometric Evidence, pages 287-343 National Bureau of Economic Research, Inc.
    3. 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.
    4. Pakes, Ariel S, 1986. "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks," Econometrica, Econometric Society, vol. 54(4), pages 755-784, July.
    5. 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 253-258, May.
    6. Tong, Xuesong & Frame, J. Davidson, 1994. "Measuring national technological performance with patent claims data," Research Policy, Elsevier, vol. 23(2), pages 133-141, March.
    7. 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.
    8. Jean Olson Lanjouw, 1998. "Patent Protection in the Shadow of Infringement: Simulation Estimations of Patent Value," Review of Economic Studies, Oxford University Press, vol. 65(4), pages 671-710.
    9. 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.
    10. 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.
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    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

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