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Patents, productivity and market value: evidence from a panel of UK firms

Author

Listed:
  • Nicolas Bloom

    (Institute for Fiscal Studies)

  • John Van Reenen

    (Institute for Fiscal Studies)

Abstract

Patents citations are a potentially powerful indicator of technological innovation. In this paper we describe the IFS-Leverhulme patents dataset that we have constructed by combining information from the US Case-Western Patent database with UK company accounts and share price information from the London Stock Exchange. Patents citations like patentc ounts, arehighly skewed and have a modal lag of four years. Analysing data on over 200 major British firms since 1968, we show that patents have an economically and statistically significant impacton firm-level productivity and market value. Patent citations contain more information than simple counts. A doubling in the stock of citation-weighted patents is associated with a four percent increase in (total factor) productivity and an eight percent increase in market value. As expected patenting and citation information feeds into market values immediately but appears to have some additional lagged effects of productivity suggesting gradual takeup of new technologies.

Suggested Citation

  • Nicolas Bloom & John Van Reenen, 2000. "Patents, productivity and market value: evidence from a panel of UK firms," IFS Working Papers W00/21, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:00/21
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    File URL: http://www.ifs.org.uk/wps/wp0021.pdf
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    Citations

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    Cited by:

    1. Praveen Kumar & Stuart M. Turnbull, 2008. "Optimal Patenting and Licensing of Financial Innovations," Management Science, INFORMS, vol. 54(12), pages 2012-2023, December.
    2. Rachel Griffith & Sokbae Lee & John Van Reenen, 2011. "Is distance dying at last? Falling home bias in fixed‐effects models of patent citations," Quantitative Economics, Econometric Society, vol. 2(2), pages 211-249, July.
    3. Barot, Bharat, 2002. "Growth and Business Cycles for the Swedish Economy 1963-1999," Working Papers 79, National Institute of Economic Research.
    4. Panayotis Dessyllas & Alan Hughes, 2005. "R&D and Patenting Activity and the Propensity to Acquire in High Technology Industries," Industrial Organization 0507008, University Library of Munich, Germany.
    5. Reitzig, Markus & Ramb, Fred, 2004. "Who do you trust while bubbles grow and blow? A comparative analysis of the explanatory power of accounting and patent information for the market values of German firms," Discussion Paper Series 1: Economic Studies 2004,17, Deutsche Bundesbank.
    6. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    7. Daniel Coronado & Manuel Acosta, 2003. "The effects of regional scientific opportunities in science-technology flows: Evidence from scientific literature cited in firms' patent data," ERSA conference papers ersa03p321, European Regional Science Association.
    8. Blundell, Richard & Griffith, Rachel & Windmeijer, Frank, 2002. "Individual effects and dynamics in count data models," Journal of Econometrics, Elsevier, vol. 108(1), pages 113-131, May.
    9. Nicholas Bloom & John Van Reenen, 2002. "Patents, Real Options and Firm Performance," Economic Journal, Royal Economic Society, vol. 112(478), pages 97-116, March.
    10. Sunil Kanwar, 2014. "The Market Valuation of Innovation: The Case of Indian Manufacturing," Working Papers id:5911, eSocialSciences.
    11. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2009. "The Effects of Entry on Incumbent Innovation and Productivity," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 20-32, February.
    12. Eduardo S. Schwartz, 2003. "Patents and R&D as Real Options," NBER Working Papers 10114, National Bureau of Economic Research, Inc.
    13. Rut Atayde & Rafael Garduño & Eduardo Robles & Pluvia Zúñiga, 2021. "Market competition and firm productivity and innovation: Responses in Mexican manufacturing industries," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(4), pages 1185-1214, August.
    14. Kilponen, Juha & Santavirta, Torsten, 2004. "Competition and Innovation - Microeconometric Evidence using Finnish Data," Research Reports 113, VATT Institute for Economic Research.
    15. Egger, Peter & Loumeau, Nicole, 2018. "The Economic Geography of Innovation," CEPR Discussion Papers 13338, C.E.P.R. Discussion Papers.
    16. Fred Ramb & Markus Reitzig, 2005. "Who do you trust while Shares are on a Roler-Coaster Ride? Balance Sheet and Patent Data as Sources of Investor Information During Volatile Market Times," DRUID Working Papers 05-15, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    17. Panayotis Dessyllas & Alan Hughes, 2005. "The Revealed Preferences of High Technology Acquirers: An Analysis of the Characteristics of their Targets," Industrial Organization 0507009, University Library of Munich, Germany.
    18. Christine Greenhalgh & Mark Longland & Oxford Intellectual Property Research Centre, 2002. "Running to Stand Still? - Intellectual Property and Value Added in Innovating Firms," Economics Series Working Papers 134, University of Oxford, Department of Economics.

    More about this item

    Keywords

    Patents; productivity; market value;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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