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Standing on the shoulders of science

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  • Schnitzer, Monika
  • Krieger, Joshua
  • Watzinger, Martin

Abstract

Today's innovations rely on scientific discoveries of the past, yet only some corporate R&D builds directly on scientific output. In this paper, we analyze U.S. patents to investigate how firms generate value by building on prior art "closer" to science and establish three new facts about the relationship between science and the value of inventions. First, we show that patent value is decreasing in distance-to-science. Patents building directly on scientific publications are on average 26% more valuable than patents in the same technology which are disconnected from science. Patents closer to science are also more likely to be in the tails of the value distribution (i.e., greater risk and greater reward). Next, we use patent text analysis to show that patent value increases with patent novelty. Third, we find that science-intensive patents are more novel. We discuss firm heterogeneity and the causes behind the science premium. Overall, firms that consistently use science for invention produce higher value patents generally, and especially when they "build on the shoulders" of their own scientific work.

Suggested Citation

  • Schnitzer, Monika & Krieger, Joshua & Watzinger, Martin, 2019. "Standing on the shoulders of science," CEPR Discussion Papers 13766, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13766
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    Cited by:

    1. Wang, Fang, 2024. "Does the recombination of distant scientific knowledge generate valuable inventions? An analysis of pharmaceutical patents," Technovation, Elsevier, vol. 130(C).
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    3. Arora, Ashish & Belenzon, Sharon & Dionisi, Bernardo, 2023. "First-mover advantage and the private value of public science," Research Policy, Elsevier, vol. 52(9).
    4. Kathrin Wernsdorf & Markus Nagler & Martin Watzinger, 2020. "ICT, Collaboration, and Science-Based Innovation: Evidence from BITNET," CESifo Working Paper Series 8646, CESifo.
    5. Hötte, Kerstin & Pichler, Anton & Lafond, François, 2021. "The rise of science in low-carbon energy technologies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 139(C).
    6. Tania Babina & Alex Xi He & Sabrina T. Howell & Elisabeth Ruth Perlman & Joseph Staudt, 2020. "The Color of Money: Federal vs. Industry Funding of University Research," NBER Working Papers 28160, National Bureau of Economic Research, Inc.
    7. Jeffrey P. Clemens & Parker Rogers, 2020. "Demand Shocks, Procurement Policies, and the Nature of Medical Innovation: Evidence from Wartime Prosthetic Device Patents," CESifo Working Paper Series 8781, CESifo.
    8. Felix Poege & Dietmar Harhoff & Fabian Gaessler & Stefano Baruffaldi, 2019. "Science Quality and the Value of Inventions," Papers 1903.05020, arXiv.org, revised Apr 2019.
    9. Arts, Sam & Hou, Jianan & Gomez, Juan Carlos, 2021. "Natural language processing to identify the creation and impact of new technologies in patent text: Code, data, and new measures," Research Policy, Elsevier, vol. 50(2).
    10. Baruffaldi, Stefano & Poege, Felix, 2020. "A Firm Scientific Community: Industry Participation and Knowledge Diffusion," IZA Discussion Papers 13419, Institute of Labor Economics (IZA).
    11. Nishimura, Junichi & Nagaoka, Sadao & Yoneyama-Hirozane, Mariko, 2022. "The impact of science-intensive drugs on longevity and cure rate: Evidence from new prescription drugs launched in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 64(C).

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    More about this item

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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