Estimates of Firms' Patent Rents from Firm Market Value

James Bessen

Working Papers from Research on Innovation

Abstract: A simple formal model shows that estimates of an upper bound on the value of firms' patent rents can be obtained from regressions on Tobin's Q. I test this model on a sample of US firms and find it is robust to a variety of considerations. The estimates correspond well with implied estimates derived from previous research. Also, these upper bound estimates are only modestly higher than estimates of patent value obtained from data on patent renewals international patent filings. This suggests that these techniques do not substantially understate patent value.

Date: 2006
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