The Use and Misuse of Patent Data: Issues for Finance and Beyond

Abstract Patents and citations are powerful tools increasingly used in financial economics (and management research more broadly) to understand innovation. Biases may result, however, from the interactions between the truncation of patents and citations and the changing composition of inventors. Whe...

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Bibliographic Details
Published in:The Review of financial studies 2022-05, Vol.35 (6), p.2667-2704
Main Authors: Lerner, Josh, Seru, Amit
Format: Article
Language:English
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Summary:Abstract Patents and citations are powerful tools increasingly used in financial economics (and management research more broadly) to understand innovation. Biases may result, however, from the interactions between the truncation of patents and citations and the changing composition of inventors. When aggregated at the firm level, these patent and citation biases can survive popular adjustment methods and are correlated with firm characteristics. These issues can lead to problematic inferences. We provide an actionable checklist to avoid biased inferences and also suggest machine learning as a potential new way to address these problems. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online
ISSN:0893-9454
1465-7368
DOI:10.1093/rfs/hhab084