Cumulative innovation and market value: Evidence from patent citations

Sharon Belenzon, 3 July 2012

According to the received wisdom, innovation is the heart-and-soul of modern growth but incentives to innovate are prone to the free-rider problem. This column partly supports that view. Looking at over 1,000 US companies it shows that internal citations of a firm's patents have a positive effect on market value while external citations have a negative effect.

Knowledge spillovers play a critical role in economic growth. For example, x-ray-computed tomography technology was developed and patented by EMI, which was able to exploit it initially. However, it also inspired hundreds of subsequent inventions by firms such as Pfizer, Syntex, Picker, and General Electric.

Topics: Productivity and Innovation
Tags: inventions, knowledge spillovers, patents, US

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The quality challenge in the European patent system

Bruno van Pottelsberghe de la Potterie, 10 December 2007

Patent applications are booming, but many seem to be of low quality and/or strategically manipulated to hide the real invention within a myriad of claims. This delays the patent-granting process and hinders the system's ultimate goal of balancing incentives for knowledge creation with knowledge dissemination. Here are some ideas on how to fix the problem.

For the European patent office, the year 2006 was marked by a new record in the number of patent filings, which was well above 200,000 applications: a 150% increase since 1995 (cf. figure on European filings). Concomitant to this boom in the number of filings is the constant increase in the average size of patent applications. For instance, Archontopoulos et al.

Topics: Productivity and Innovation
Tags: inventions, knowledge creation, patent applications, R&D