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Market value and patent citations

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  • Hall, Bronwyn H.
  • Jaffe, A
  • Trajtenberg, M

Abstract

We explore the usefulness of patent citations as a measure of the "importance" of a firm's patents, as indicated by the stock market valuation of the firm's intangible stock of knowledge. Using patents and citations for 1963-1995, we estimate Tobin's q equations on the ratios of R&D to assets stocks, patents to R&D, and citations to patents. We find that each ratio significantly affects market value, with an extra citation per patent boosting market value by 3%. Further findings indicate that "unpredictable" citations have a stronger effect than the predictable portion, and that self-citations are more valuable than external citations.

Suggested Citation

  • Hall, Bronwyn H. & Jaffe, A & Trajtenberg, M, 2005. "Market value and patent citations," Department of Economics, Working Paper Series qt0cs6v2w7, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    • Handle: RePEc:cdl:econwp:qt0cs6v2w7
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