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Measuring the impact of innovation on firm value: a new approach

  • Kraft, Kornelius
  • Czarnitzki, Dirk

Most of the existing empirical literature on the relationship of firm value and knowledge capital is based on the stock market valuation of companies. However, the assets of many firms are not publicly traded, and hence the calculation of market value is limited to a subsample of firms. We suggest to use a credit rating score instead and present an empirical analysis. It turns out that innovative firms, i.e. those with a reasonable knowledge stock, have a better credit rating and thus, as we propose, a higher value. However, too much of innovative activi-ties is seen as risky and the firm value decreases.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 02-73.

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Date of creation: 2002
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Handle: RePEc:zbw:zewdip:532
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  1. Bronwyn H. Hall and Adam Jaffe, and Manuel Trajtenberg., 2001. "Market Value and Patent Citations: A First Look," Economics Working Papers E01-304, University of California at Berkeley.
  2. Bronwyn H. Hall, 1999. "Innovation and Market Value," Finance 9902009, EconWPA.
  3. Fisher, Franklin M & McGowan, John J, 1983. "On the Misuse of Accounting Rates of Return to Infer Monopoly Profits," American Economic Review, American Economic Association, vol. 73(1), pages 82-97, March.
  4. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
  5. Mansfield, Edwin, et al, 1977. "Social and Private Rates of Return from Industrial Innovations," The Quarterly Journal of Economics, MIT Press, vol. 91(2), pages 221-40, May.
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