Firm Patenting Research Articles

Value Creation in Electronic Business through Information Technology Competence, Novelty and Complementarities: A Theoretical Framework and Empirical Evidence

Although much of information systems research has been devoted to the study of electronic business phenomena, including the antecedents of electronic business performance, and the impact of electronic business technologies, not much research has examined the role of patenting information technology in value creation in electronic business. This is an important piece of the e-business phenomena because novel Internet business methods have been patented by several firms and serve as vehicles for value creation. In this paper, identifying patenting novel business methods or business processes as an important mechanism for value creation, I examine the determinants of the firm propensity to patent business processes or methods and the moderating role of such patenting on the impact of electronic integration and information sharing on revenues from e-business transactions. Using a secondary dataset of large firms from the US, and patent application data from USPTO, I analyzed the information technology research and development process and tested the impact of information technology patents on electronic business firm performance. I test two models for estimating the relationship between electronic integration, information sharing and patenting. The results indicate support for the moderating role of patenting on the effect of electronic integration with customers, on e-Business performance and strong support for the impact of information technology intensity on the firm propensity to patent. Specifically, investment in IT R&D did not have any effect on the firm's number of IT patents. However, the use of knowledge management systems contributed positively to the firm's number of IT patents. Investment in hardware resources and software applications had a significant impact on the firm's IT patents. Furthermore, IT patents did not have any effect on firm performance, but investment in IT software applications had a significant positive effect on firm performance. These results provide insight into IT R&D, IT innovation, IT patents and firm performance and the role of patenting business methods and processes in generating value from transactions in electronic business.

Incentivizing Managers to Build Innovative Firms

We investigate whether the equity-linked components of top executive pay have an effect on patenting activity within a firm. We find a positive relationship between firm patenting activity and managerial alignment incentives created by stock and stock option grants. Prior work has shown that the market value of a firm reflects the value of its patents. Thus, our finding suggests innovation is one such channel through which equity alignment incentives positively impact firm value. On the other hand, we find that the risk-taking incentive from stock options does not increase patenting.

Using Patent Citation Patterns to Infer Innovation Market Competition

We propose an empirical strategy for estimating competition in innovation markets based on a model of creative-destruction. Our method relates firms’ market return on equity to information about patent citation patterns. Two innovations we introduce are using daily abnormal stock returns rather than annual measures of Tobin’s q and creating citation patterns related to the area of science a firm patents in as represented by the detailed patent classification system. We find that firm’s market value increases when its patent portfolio is cited and when there are citations to an area of science in which their patent portfolios are prominent. Holding this effect constant, we find that citations from patents in the same area of science tend to reduce market value. We interpret these findings as consistent with more citations indicating more valuable intellectual property but citations from competing technologies decreasing its value.

An Empirical Analysis about the Effect on Performance of Firm's Patent Competency : Focusing on the High Performance Venture Firms in Korea

An Empirical Analysis about the Effect on Performance of Firm's Patent Competency : Focusing on the High Performance Venture Firms in Korea

Should auld acquaintance be forgot? the reverse transfer of knowledge through mobility ties

AbstractWhile mobility's effect on knowledge transfer to firms that hire mobile employees is well demonstrated, we choose to explore mobility's effect on knowledge transfer to firms that lose these employees. Focusing on this ‘outbound mobility’ allows us to isolate effects of social mechanisms associated with mobility. We find that semiconductor firms losing employees are more likely to subsequently cite patents of firms hiring these employees, suggesting that mobility‐driven knowledge flows are bidirectional. In addition, the outbound mobility effect is pronounced when mobility occurs between geographically distant firms, but attenuates for geographically proximate firms since other redundant knowledge channels exist within regions. Copyright © 2009 John Wiley & Sons, Ltd.

Empirical Tests for Creative Destruction in the Pharmaceutical Industry

We propose an empirical strategy for estimating competition in innovation markets based on a model of creative-destruction. Our method relates equity in a firm to information about patent citation patterns. Two innovations we introduce are using daily abnormal stock returns rather than annual measures of Tobin's q and creating citation patterns related to the area of science a firm patents in as represented by the detailed patent classification system. We find that firm's market value increases when their patent portfolio is cited and when there are citations to an area of science in which they are prominent. We interpret these findings consistent with important R&D creating value. Our tests of a patent portfolio being passed over are not consistent with value destruction.

The technological innovation performance of Chinese firms: the role of industrial and academic R&D, FDI and the markets in firm patenting

This paper examines the recent development of industrial technology in China using a rich and novel Chinese patent dataset, which allows us to get a comprehensive view of the invention activities in China. Combing patent statistics with R&D and Foreign Direct Investment (FDI) indicators, we found that the R&D activities at local universities and research institutes were the most important external factors behind the increase in domestic firms' patenting activities. FDI, on the other hand, appeared to have a negative effect on domestic firm patenting, at least until foreign market demand for domestic production is established.

Pre-seed government venture capital funds

This paper analyses a Pre-seed Fund (PSF) government venture capital (VC) program for the purpose of improving our understanding about effective public policy towards entrepreneurial finance. The PSF program is a public-private partnership started in 2002 for the purpose of fostering more investment in nascent high-tech entrepreneurial firms in Australia. Data from Venture Economics indicate PSFs are the primary provider of seed stage VC in Australia, but PSFs are not more likely to invest in high-tech firms than other types of VC funds. PSFs have smaller portfolios (number of investees) per manager than other types of VC funds, and are more likely to invest in firms resident in the same state, but do not stage and syndicate more frequently than other types of VC funds. Overall, therefore, the structure of the program has given rise to mixed performance in terms of finance and governance provided to nascent high-tech entrepreneurial firms. As well, there is also suggestive evidence that the PSF program diminishes the incentives for Innovation Investment Funds (a previously existing Australian government VC fund program) to invest in seed stage ventures, and hence competing government initiatives appear to be crowding out one another. Further evidence suggests that among the four PSFs in existence, one PSF has outperformed the other PSFs in regards to the investee firm patents and financial statement performance, even though this fund has invested less money and charged lower management fees than its counterparts. Hence, a further implication is that the impact of government-sponsored VC funds depends not only on the design of the program but also on the selection of the VC managers carrying out the investments.

Technology sourcing by large incumbents through acquisition of small firms

Innovation activities in high technology industries provide considerable challenges for technology and innovation management. In particular, since these industries have a long history of radical innovations taking place through distinct industry cycles of higher and lower demand, firms frequently consider the option to use acquisitions as a means for technology sourcing. The paper investigates this behaviour for three high technology industries, namely semiconductor manufacturing, biotechnology and electronic design automation which is a specific sub-segment of the semiconductor industry. It analyses the association of firm characteristics with different aspects of acquisition behaviour with a particular focus being put on innovation-related firm characteristics. The paper confirms a substitutive relationship between acquisitions and own research activities as well as between own and acquired firm patenting, but also finds that firm size, financial conditions and geographical origin of the firm matter for acquisition behaviour.

Firm age and innovation

We examine how firm age relates to innovtion quality, and how this relationship varies depending on the nature of technology. Using data on patents of COMPUSTAT firms, we find that firm age is negatively related to technical quality, and that this effect is greater in technologically active areas. The economic implication of this effect is substantial; each additional year reduces the impact of a 10% increase in R&D intensity on the firm's market value by over 3%.

In search of performance effects of (in)direct industry science links

Using patent data from the European Patent Office combined with firm-level data, we evaluate the contribution of science linkages to the innovation performance of a firm at the patent level. We examine the effect of (i) firm-level linkages to science (firms active in publication and co-publication), and (ii) invention-specific linkages (patents with citations to scientific publications) on patent quality measures. Our results suggest that citations to scientific publications are not significant in explaining forward citations but are positively related to the scope of forward citations. Our main finding is that the linkage to science at the firm level matters more for forward citations than the linkage at the invention/patent level. In particular, nonscience-related patents of firms with firm level scientific linkages are more frequently, more broadly, and more quickly cited than comparable patents of firms without these science linkages.

The relationship between standardization and innovative activity: An exploratory study on Korean service firms

Summary The paper analyzes the effects of standards and standardization on innovative activities in Korean service firms. R&D intensity and patent application are used as proxies for innovative activity. The variables of standardization activity are standardization management at the firm level, domestic standardization activity, international standardization activity, and accreditation. The logistic regression model is constructed using data from 102 service firms in Korea. The empirical findings are as follows: First, standardization management, domestic standardization, and international standardization have no influence on both R&D intensity and patent application. This seems to be due to the characteristics of the service firms, which do not perform standardization activities in the R&D stage. Second, standardization management has a negative influence on patent application, because there is a competitive relationship between standardization and patent application, which is also observed in the manufacturing firms. Third, while acquisition of accreditation activity has a negative effect on a firm's R&D intensity, it has a positive effect on a firm's patent application. In short, for Korean service firms, standardization activity is not related with its innovation activities, which include R&D investment and patent application. Only the acquisition of accreditation activity has an influence on innovative activities. The activity is related with the mid or final stages of technological innovation such as patent, rather than the initial stages, product planning, or R&D. Therefore, the Korean government and firms should try to connect standardization activity with all the stages of business innovation, from R&D to marketing.

The private value of patents by patent characteristics: evidence from Finland

I use renewal rates and fees to estimate the private value of Finnish patents by patent characteristic. I disaggregate the value estimations by applicant, patent breadth, and technology. Firm patents are 1.5 times more valuable than patents owned by individuals. This holds also when controlling for technology and breadth. There are large differences in values between technologies but in contrast to the usual assumption made in the theoretical literature, broader patents are not necessarily more valuable than narrower ones. Patent value is skewed and therefore the number of patents should be weighted by an index when measuring technological change. I construct this index for Finnish patents and find that renewing a patent one more year signals a 1.5 times more valuable patent.

Combining Patent Law Expertise with R&D for Patenting Performance

Drawing on the resource-based view (RBV), this paper examines how the combination or bundling of resources influences firm-patenting performance. We hypothesize that firm-patenting output depends not only on research and development (R&D) resources, but also on the patent law expertise combined with R&D inside the firm. We predict that the specialization of this in-house legal resource to R&D enables firms to identify patentable inventions more effectively and to convert them into patents. We also argue that there may be a positive complementary relationship between patent law expertise and R&D, such that patent law expertise will have a larger effect on patent output when it is deployed with matching higher levels of R&D. Furthermore, we predict that the effect of internal patent law expertise on firm patenting will be moderated by organization- and industry-level contextual factors. To test our hypotheses, we examine the patenting performance of a sample of Fortune 500 firms from 1990 to 2000. Results suggest that in-house patent law expertise is a significant predictor of firm-patenting performance; furthermore, this effect is moderated by the firm's level of top management team (TMT) patent law background and industry-patenting pressures. However, our hypothesis of a complementary relationship between patent law expertise and R&D was not supported; instead, we found evidence of a counterintuitive (weak) negative interaction between these two variables. Our findings shed light on how the combination of other resources with R&D affects firm-patenting performance, and advance the integration of complementary organizational perspectives with the RBV.

FIRM PATENT STRATEGIES IN US TECHNOLOGY STANDARDS DEVELOPMENT

The focus of this article is on exploring the business competitive consequences of firm patent strategies in the United States de jure technology standard development processes. An analytic framework ("Firm Patent Strategies Matrix") is created which formally identifies a set of firm patent strategies applicable in the de jure technology standard development process. This Firm Patent Strategies Matrix is predicated on two key variables relevant to the standard development process: first, firms are either active participants in standard-setting committees, or they are non-participants, and second, firms are either disclosing appropriate information on potentially relevant patented technology (or patent pending applications on such technology), or they are not disclosing such potentially relevant patented information on technology (or patent pending applications on such technology), in the standard development process. The Firm Patent Strategies Matrix identifies the following four generic strategic choices for a technology-driven firm to choose among concerning the disposition of its patents: (1) Disclosure/Participation, (2) Disclosure/Non-Participation, (3) Non-Disclosure/Participation, and (4) Non-Disclosure/Non-Participation. Public policy issues, relevant to these Firm Patent Strategies, are identified (e.g., RAND licencing terms, patent ambush and submarine patents) and recommended policy solutions are offered (e.g., instituting Ex Ante royalty discussions, vigorous federal antitrust enforcement against patent ambush and the wider use of firm patent liability insurance, respectively).

The Disputed Quality of Software Patents

We analyze the characteristics of the patents held by firms in the software industry. Unlike prior researchers, we rely on examination of the individual patents to determine which patents involve software inventions. This method of identifying the relevant patents is more laborious than the methods that previous scholars have used, but it produces a dataset from which we can learn more about the role of patents in the software industry. In general, we find that the patents computer technology firms obtain on software inventions have more prior art references, claims, and forward citations than the patents the same firms obtain on non-software inventions. We also find that the patents that software firms obtain on software inventions also have more prior art references, claims, and forward citations than the software patents obtained by the firms that derive revenues from other product lines. Finally, we conclude that the patents of the largest firms are no better (or worse) than the patents of the smallest firms, belying the idea that large firms are plagued by challenges based on the worthless patents of their smaller competitors. The paper closes with a brief discussion of the implications of our empirical analysis. The findings undermine the strongest criticisms about the low quality of software patents. It is simply not accurate to say that software patents as a class have remarkably low numbers of prior art references and forward citations. Thus, they cut against technology-based patent reforms designed to make it more difficult to obtain software patents. On the other hand, the evidence that small firms are no less capable than large firms at producing quality patents vitiates concerns that higher hurdles at the early stage of the patenting process would disadvantage smaller inventors in particular.

Pioneering Advantage in Generic Drug Competition

Pharmaceutical markets experience the entry of numerous generic firms upon expiration of the brand firm's patent. In this paper, we take a close look at competition among the generic entrants during the first three years after patent expiration and examine whether there is a first mover advantage. We specify a random effect nested logit model of competition that allows for competition between the brand drug and generics, and among multiple generic drugs. The model accommodates the effects of prices, detailing, sampling, journal advertising, time-in-market, and molecule-specific characteristics. The model is estimated on cross-section time-series data for 49 molecules in which the brand drug lost patent exclusivity between 1992 and 2000. We find strong evidence that the early generic entrant enjoys a substantial market share and profit advantage over the second and the third entrants, after controlling for differences in marketing activities. We also find evidence suggesting that the advantage is due to the response of the retail pharmacy channel, and due to differential effectiveness of advertising and pricing between earlier versus later entrants.

Strategic Patenting Decisions and Their Influence on Firm Patent Valuation

The economic rents associated with patent portfolios are highly skewed with only a small portion having value. This leads researchers and industry to ask what early strategic patenting decisions around the patent itself will impact the future value of the patent, specifically within the context of small firms. To address this question the paper modeled these ex-ante strategic patenting decisions by using a common measurement of forward citations as a proxy for patent value. The six indicators of family size, breadth, claim count, jurisdiction count, provisional basis and priority claim were modeled using a sample of 386 patents granted in the Mechanical and Electrical field. A focus on the small firm as well as the two strategic patent decision indicators provisional basis and priority claim are areas that have not been explicitly investigated in previous research. Controlling for industry and firm patenting experience resulted in differences of predictors between small and large firms, with a higher likelihood of strategic patenting decisions influencing small firms over large firms. A stronger relationship was found for small firms with indicators of breadth and priority claims, as compared to a weaker relationship of only claim counts for large firms. Research also indicated that from a small firm management perspective the most potential valuable patent is one that covers a broad scope of technology is a new filing and does not claim priority to other applications.

When do incumbents learn from entrepreneurial ventures?: Corporate venture capital and investing firm innovation rates

In this paper, we focus on the potential innovative benefits to corporate venture capital (CVC), i.e. equity investments in entrepreneurial ventures by incumbent firms. We propose that corporate venture capital programs may be instrumental in harvesting innovations from entrepreneurial ventures and thus an important part of a firm's overall innovation strategy. We hypothesize that these programs are especially effective in weak intellectual property (IP) regimes and when the firm has sufficient absorptive capacity. We analyze a large panel of public firms over a 20-year period and find that increases in corporate venture capital investments are associated with subsequent increases in firm patenting.

Firm Age and Innovation

We examine how firm age relates to innovation quality, and how this relationship varies depending on the nature of technology. Using data on patents of COMPUSTAT firms, we find that firm age is negatively related to technical quality, and that this effect is greater in technologically active areas. The economic implication of this effect is substantial; each additional year reduces the impact of a 10% increase in R&D intensity on the firm's market value by more than 3%.