Patents to Products: Innovation, Product Creation, and Firm Growth by Salomé Baslandze, Einaudi Institute for Economics and Finance.
Please register by sending an email to [email protected] with your full name, surname and university/work-place until 5th of September, 13:00.
Seminar language: English.
How do patents relate to product innovation? To study this question, we construct a new patent-to-product dataset combining patent data with the detailed product- and firm-level data for the consumer goods sector. Using textual analysis of patent documents together with product descriptions, we link specific patents to finely defined product categories within firms and time periods. Our findings indicate that there is a substantial amount of product innovation that comes from firms that have never patented. Nevertheless, for patenting firms, standard patent-based metrics of innovation are correlated to product innovation defined based on both quantity and quality of new products. We find that market leaders use patents differently than followers. In particular, patents of large firms have a weaker association with the quality and quantity of product innovations. Nevertheless, consistent with the notion that patents being used to limit competition, we find that patents of larger firms are associated with higher future revenues even after accounting for the introduction of new products associated with those patents. Motivated by these empirical patterns, we develop a theoretical framework and use it to decompose the value of a patent. We show that the private value of a patent increases as firms become market leaders. This increase is mostly driven by an increasing value derived from protective patenting as opposed to productive patenting.