This paper provides formal treatment to the idea of patenting as a form of market stealing between R&D firms. It extends the creative destruction literature by allowing innovations to build off each other forming a network of ideas. Patent citations keep track of this network. The theory maps the distribution of productivities in the development of new ideas onto the distribution of patent values through patent citations. If productivities are drawn from a Pareto-Levy distribution then the distribution of patent values also falls within this class. The theory is then applied to data on US patent citations. Model-based valuations support the assumption of Pareto-distributed productivities. As an added feature, model-based valuations outperform citation counts (the traditional measure) as a proxy for patent values
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Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number
834.
Length: Date of creation: 03 Dec 2006 Date of revision: Handle: RePEc:red:sed006:834
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