Patenting and industrial performance: the case of the machine tool industry

Manfred Fleischer

No FS IV 98-9, Discussion Papers, Research Unit: Market Dynamics from WZB Berlin Social Science Center

Abstract: Using the case of an important capital goods industry the paper examines the impact of the national patent system on the performance of firms. Many theories attempt to explain the firms’ innovative behavior using the concepts of national and sectorial systems of innovation. The patent law plays a particularly important role in these systems. At the level of the firm its importance rests on the possibility to appropriate profits. An empirical analysis of a sample of the 49 largest international manufacturers of machine tools shows that patents are a superior mechanism for appropriating the returns on R&D in this industry. This is indicated by a strong positive relationship between the market value of the firm and its patenting activities.

Date: 1998
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