Market Value and Patent Citations

Bronwyn Hall, Adam Jaffe and Manuel Trajtenberg

RAND Journal of Economics, 2005, vol. 36, issue 1, 16-38

Abstract: We explore the usefulness of patent citations as a measure of the "importance" of a firm's patents, as indicated by the stock market valuation of the firm's intangible stock of knowledge. Using patents and citations for 1963--1995, we estimate Tobin's q equations on the ratios of R&D to assets stocks, patents to R&D, and citations to patents. We find that each ratio significantly affects market value, with an extra citation per patent boosting market value by 3%. Further findings indicate that "unpredictable" citations have a stronger effect than the predictable portion, and that self-citations are more valuable than external citations.

Keywords: Search; Learning; Information and Knowledge Asset Pricing Information and Market Efficiency; Event Studies Financing Policy; Capital and Ownership Structure; financial ratios; value of firm Intellectual Property Rights: National and International Issues (patents, copyrights) Firm; Knowledge; Stock Market; Stocks (search for similar items in EconPapers)
JEL-codes: D83 G12 G14 G32 O34 (search for similar items in EconPapers)
Date: 2005
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