PATENTS, REAL OPTIONS AND FIRM PERFORMANCE

Analysing the new IFS-Leverhulme database on over 200 major British firms since 1968 we show that patents have an economically and statistically significant impact on firm-level productivity and market value. While patenting feeds into market values immediately it appears to have a slower effect on...

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Bibliographic Details
Published in:The Economic journal (London) 2002-03, Vol.112 (478), p.C97-C116
Main Authors: Bloom, Nicholas, Van Reenen, John
Format: Article
Language:English
Subjects:
Capital markets
Capital stocks
Coefficients
Contributed Papers
Economic models
Economic performance
Economic theory
Economic uncertainty
Economic value
Economics
Enterprises
Financial investments
Financial performance
Impact analysis
Innovation
Market value
Production functions
Productivity
Stock options
Studies
Technological innovation
Uncertainty
United Kingdom
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Summary:Analysing the new IFS-Leverhulme database on over 200 major British firms since 1968 we show that patents have an economically and statistically significant impact on firm-level productivity and market value. While patenting feeds into market values immediately it appears to have a slower effect on productivity. This generates valuable real options because patents provide exclusive rights to develop new innovations, enabling firms to delay investments. Higher market uncertainty, which increases the value of real options, reduces the impact of new patents on productivity. If the government's policy to reduce uncertainty is successful then this should increase the productivity of Britain's knowledge capital.
ISSN:0013-0133
1468-0297
DOI:10.1111/1468-0297.00022