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Market Value and Patent Citations: A First Look

Author

Listed:
  • Bronwyn H. Hall

    (University of California, Berkeley; Nuffield College Oxford; NBER; & IFS)

  • Adam Jaffe

    (Brandeis University & NBER)

  • Manuel Trajtenberg

    (Tel Aviv University & NBER)

Abstract

As patent data become more available in machine-readable form, an increasing number of researchers have begun to use measures based on patents and their citations as indicators of technological output and information flow. This paper explores the economic meaning of these citation-based patent measures using the financial market valuation of the firms that own the patents. Using a new and comprehensive dataset containing over 4800 U. S. Manufacturing firms and their patenting activity for the past 30 years, we explore the contributions of R&D spending, patents, and citation-weighted patents to measures of Tobin's Q for the firms. We find that citation-weighted patent stocks are more highly correlated with market value than patent stocks themselves and that this fact is due mainly to the high valuation placed on firms that hold very highly cited patents. We also find that self-citations are worth about twice as much as ordinary citations, especially to smaller firms.

Suggested Citation

  • Bronwyn H. Hall & Adam Jaffe & Manuel Trajtenberg, 2002. "Market Value and Patent Citations: A First Look," Development and Comp Systems 0201001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpdc:0201001
    Note: 49 pages, Acrobat .pdf
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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