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Valuation of innovation: The case of iPhone

  • Korkeamäki, Timo
  • Takalo, Tuomas

We estimate the private value of Apple’s iPhone by observing abnormal stock market reactions to news announcements and patent publications related to the innovation. Our estimate of the lower bound on the market valuation of iPhone is fairly high, at minimum 30 billion U.S. (event day) dollars. We find that patentable technology explains about 25% of that total value. We also find a weak negative reaction among Apple’s rivals to the news about iPhone but no significant reaction to the publication of patent documents concerning iPhone can be observed. The evidence suggests that the value of iPhone primarily stems from Apple’s management and marketing abilities and efforts rather than from underlying "hard" technologies and intellectual property.

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File URL: http://mpra.ub.uni-muenchen.de/28042/1/MPRA_paper_28042.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 28042.

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Date of creation: 28 Dec 2010
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Handle: RePEc:pra:mprapa:28042
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  2. Shapiro, Carl, 2000. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting," Competition Policy Center, Working Paper Series qt4hs5s9wk, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
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  8. Nick Bloom & John Van Reenen, 2010. "Why do management practices differ across firms and countries?," LSE Research Online Documents on Economics 47491, London School of Economics and Political Science, LSE Library.
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  11. Lerner, Josh, 2006. "The new new financial thing: The origins of financial innovations," Journal of Financial Economics, Elsevier, vol. 79(2), pages 223-255, February.
  12. Griliches, Zvi, 1981. "Market value, R&D, and patents," Economics Letters, Elsevier, vol. 7(2), pages 183-187.
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