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General Purpose and Focused Invention, Market Value, and Productivity

Year 2024, , 80 - 100, 28.03.2024
https://doi.org/10.54287/gujsa.1357879

Abstract

We study returns to general purpose and focused invention at the firm level for a panel of manufacturing firms in the U.S. for the period 1976-1995, by studying their relationships with market value and Total Factor Productivity. We construct stocks of patents that lie at the two relevant tails of the distribution of the generality index (Trajtenberg et al., 1997; Henderson et al, 1998) to measure general purpose and focused invention at the firm level. In line with expectations, there is a market value premium to focused invention, and a productivity premium to general purpose invention. Estimates for the value of focus indicate that moving a single patent from the upper tail of the generality distribution to the lower tail would increase market value by .24×q million 1992 dollars on average, where q is Tobin’s q. The firm with the average general patent stock would gain 6.7×q million in market value if all its patents at the highest quartile of the generality distribution were moved to the lowest. In terms of the value of general purposeness, moving all its focused patents to the general category increases Total Factor Productivity by 2.3% to 2.8%, and five-year productivity growth by 3.9% to 5.2%, for the average firm. A potential implication is that corporate basic research is associated with significant long-term benefits in terms of productivity growth.

References

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Year 2024, , 80 - 100, 28.03.2024
https://doi.org/10.54287/gujsa.1357879

Abstract

References

  • Akcigit, U., Hanley, D., & Serrano-Velarde, D. (2021). Back to Basics: Basic Research Spillovers, Innovation Policy, and Growth. The Review of Economic Studies, 88(1), 1–43. https://doi.org/10.1093/restud/rdaa061
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  • Arora, A., Belenzon, S., Patacconi, A. (2018). The decline of science in corporate R&D. Strategic Management Journal, 39(1), 1-266. https://doi.org/10.1002/smj.2693
  • Arora, A., Belenzon, S., & Sheer. L. (2021). Knowledge spillovers and corporate investment in scientic research. American Economic Review, 111(3), 871-898. https://doi.org/10.1257/aer.20171742
  • Arora, A., Belenzon, S., Dionisi, B. (2023). First-mover advantage and the private value of public science. Research Policy, 52, 104867. https://doi.org/10.1016/j.respol.2023.104867
  • Barirani, A., Beaudry, C., & Agard, N. (2015). Distant recombination and the creation of basic inventions: An analysis of the diffusion of public and private sector nanotechnology patents in Canada. Technovation, 36-37, 39-52. https://doi.org/10.1016/j.technovation.2014.10.002
  • Bartelsman, E., Haltiwanger, J., & Scarpetta, S. (2013). Cross-Country Differences in Productivity: The Role of Allocation and Selection. American Economic Review, 103(1), 305-334. https://doi.org/10.1257/aer.103.1.305
  • Belenzon, S. (2012). Cumulative Innovation and Market Value: Evidence from Patent Citations. Economic Journal, 122, 265-285. https://doi.org/10.1111/j.1468-0297.2011.02470.x
  • Bessen, J. (2009). NBER PDP Project User Documentation: Matching Patent Data to Compustat Firms. Unpublished manuscript.
  • Bloom, N., Schankerman, M., & Reenen, J.V. (2013). Identifying Technology Spillovers and Product Market Rivalry. Econometrica, 81(4), 1347-1393. https://doi.org/10.3982/ecta9466
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  • Chen, X., Mao, J., Ma, Y., Li, G. (2024). The knowledge linkage between science and technology influences corporate technological innovation: Evidence from scientific publications and patents. Technological Forecasting and Social Change, 198, 122985. https://doi.org/10.1016/j.techfore.2023.122985
  • Choi, J-U., Lee, C-Y. (2022). The differential effects of basic research on firm R&D productivity: The conditioning role of technological diversification. Technovation, 118, 102559. https://doi.org/10.1016/j.technovation.2022.102559
  • Coad, A., Segarra-Blasco, A., & Teruel, M. (2021), A bit of basic, a bit of applied? R&D strategies and firm performance. Journal of Technology Transfer, 46, 1758-1783. https://doi.org/10.1007/s10961-020-09826-1
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  • Crass, D., & Peters, B. (2014). Intangible Assets and Firm-Level Productivity. ZEW Discussion Paper No.14-120. https://doi.org/10.2139/ssrn.2562302
  • Crépon, B., Duguet, E., & Mairesse, J. (1998). Research, Innovation, and Productivity: An Econometric Analysis at the Firm Level. Economics of Innovation and New Technology, 7(2), 115-158. https://doi.org/10.1080/10438599800000031
  • Czarnitzki, D., & Thorwarth, S. (2012). Productivity effects of basic research in low-tech and high-tech industries. Research Policy, 41, 1555-1564. https://doi.org/10.1016/j.respol.2012.04.009
  • Dean, T., Zhang, H., Xiao, Y. (2022). The role of complexity in the Valley of Death and radical innovation performance. Technovation, 109, 102160. https://doi.org/10.1016/j.technovation.2020.102160
  • Dindaroglu, B. (2014). Scientific Labor Mobility, Market Value, and Knowledge Flows. MPRA Working Paper No. 88043.
  • Doraszelski, U., & Jaumandreu, J. (2013). R&D and Productivity: Estimating Endogenous Productivity. Review of Economic Studies, 80, 1338-1383. https://doi.org/10.1093/restud/rdt011
  • Ernst, H. (1998). Industrial research as a source of important patents. Research Policy, 27, 1-15. https://doi.org/10.1016/s0048-7333(97)00029-2
  • Filippova, E. (2019). Empirical Evidence and Economic Implications of Blockchain as a General Purpose Technology. In: 2019 IEEE Technology & Engineering Management Conference (TEMSCON), Atlanta, GA (pp. 1-8). https://doi.org/10.1109/TEMSCON.2019.8813748
  • Gómez-Baquero, F. (2009). Measuring the generality of nanotechnologies and its potential implications. In: 2009 Atlanta Conference on Science and Innovation Policy, Atlanta, GA (pp. 1-9). https://doi.org/10.1109/acsip.2009.5367858
  • Greenhalgh, C., & Longland, M. (2005). Running to Stand Still? - The Value of R&D, Patents and Trade Marks in Innovating Manufacturing Firms. International Journal of the Economics of Business, 12(3), 307-328. https://doi.org/10.1080/13571510500299326
  • Griffith, R., Huergo, E., Mairesse, & J., Peters, B. (2006). Innovation and Productivity Across Four European Countries. Oxford Review of Economic Policy, 22, 483-498. https://doi.org/10.1093/oxrep/grj028
  • Griliches, Z. (1963). The Sources of Measured Productivity Growth: United States Agriculture, 1940-60. Journal of Political Economy, 71(4), 331-346. https://doi.org/10.1086/258782
  • Griliches, Z. (1979). Issues in Assessing the Contribution of R&D to Productivity Growth. Bell Journal of Economics, 10(1), 92-116. https://doi.org/10.2307/3003321
  • Griliches, Z. (1981). Market Value, R&D, and Patents. Economics Letters, 7, 181-187. https://doi.org/10.1016/0165-1765(87)90114-5
  • Griliches, Z. (1986). Productivity, R and D, and Basic Research at the Firm Level in the 1970’s. NBER Working Paper No: 1547. https://doi.org/10.3386/w1547
  • Griliches, Z. (1988). Productivity Puzzles and R & D: Another Nonexplanation. Journal of Economic Perspectives, 2(4), 9-21. https://doi.org/10.1257/jep.2.4.9
  • Griliches, Z. (1998). Patent Statistics as Economic Indicators: A Surveyç In: Z. Griliches (Ed.), R&D, patents, and productivity. University of Chicago Press, Chicago, IL. 287-343. https://doi.org/10.7208/chicago/9780226308920.001.0001
  • Guo, Y., Gao, P., & Cheng, D. (2022). The Effects of R&D and its Different Types on Firm Productivity: Evidence from China. International Journal of Innovation Management, 26(08), 2250065. https://doi.org/10.1142/s1363919622500657
  • Jefferson, G.H., Huamao, B., Xiaojing, G. & Xiaoyun, Y. (2006). R&D Performance in Chinese industry. Economics of Innovation and New Technology, 15, 345-366. https://doi.org/10.1080/10438590500512851
  • Hall, B.H. (2011). Innovation and Productivity. NBER Working Paper No. 17178. https://doi.org/10.3386/w17178
  • Hall, B.H., & Oriani, R. (2006). Does the Market Value R&D Investments by European Firms? Evidence From a Panel of Manufacturing Firms in France, Germany, and Italy. International Journal of Industrial Organization, 24, 971-993. https://doi.org/10.1016/j.ijindorg.2005.12.001
  • Hall, B.H., & Trajtenberg, M. (2004). Uncovering GPTS with Patent Data. NBER Working Paper No. 10901. https://doi.org/10.3386/w10901
  • Hall, B.H., & Vopel, K. (1997). Innovation, Market Share, and Market Value. Unpublished manuscript.
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There are 75 citations in total.

Details

Primary Language English
Subjects Applied Statistics
Journal Section Statistics
Authors

Burak Dindaroğlu 0000-0003-2889-3704

Early Pub Date February 6, 2024
Publication Date March 28, 2024
Submission Date September 10, 2023
Published in Issue Year 2024

Cite

APA Dindaroğlu, B. (2024). General Purpose and Focused Invention, Market Value, and Productivity. Gazi University Journal of Science Part A: Engineering and Innovation, 11(1), 80-100. https://doi.org/10.54287/gujsa.1357879