2017
DOI: 10.1093/rfs/hhx101
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Abstract: The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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Cited by 145 publications
(149 citation statements)
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References 146 publications
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“…In particular, we introduce two new patent-based measures to capture the theoretical distinction between 'exploration' and 'exploitation' in corporate innovation search strategy (March, 1991;Manso, 2011). Our results expand on the recent findings that investors tend to undervalue firms that: (a) invest heavily in R&D and have exhibited historical success in converting R&D investment into sales (Cohen et al, 2013); are efficient in translating R&D expenditure into future patents (Hirshleifer et al, 2013) and (c) produce patents that are relatively more "original" compared to all other patented innovation, proxied by the diversity of technology classes cited (Hirshleifer, Hsu & Li, 2018). While these papers illustrate investors' difficulty in comparing distinct firms across various innovation metrics, such as historical capacity or the originality of their patents, our findings highlight the added difficulty that investors face when interpreting the incremental economic significance of a firm's current innovative output relative to the past innovative output of the same firm.…”
Section: Introductionsupporting
confidence: 77%
“…In particular, we introduce two new patent-based measures to capture the theoretical distinction between 'exploration' and 'exploitation' in corporate innovation search strategy (March, 1991;Manso, 2011). Our results expand on the recent findings that investors tend to undervalue firms that: (a) invest heavily in R&D and have exhibited historical success in converting R&D investment into sales (Cohen et al, 2013); are efficient in translating R&D expenditure into future patents (Hirshleifer et al, 2013) and (c) produce patents that are relatively more "original" compared to all other patented innovation, proxied by the diversity of technology classes cited (Hirshleifer, Hsu & Li, 2018). While these papers illustrate investors' difficulty in comparing distinct firms across various innovation metrics, such as historical capacity or the originality of their patents, our findings highlight the added difficulty that investors face when interpreting the incremental economic significance of a firm's current innovative output relative to the past innovative output of the same firm.…”
Section: Introductionsupporting
confidence: 77%
“…For instance, Gu (2005) and Pandit et al (2011) show that firms with stronger patent portfolios report better profitability and operating performance. Similarly, researchers have documented that firms with better patent performance are associated with higher market valuation (Griliches 1990;Deng et al 1999;Lerner 1994;Lanjouw and Schankerman 2004) and subsequent stock returns (Gu 2005;Cohen et al 2013;Hirshleifer et al 2013Hirshleifer et al , 2018. Overall, prior studies collectively suggest strong, positive effects of corporate innovation activities on operating performance, profitability, and market value.…”
mentioning
confidence: 93%
“…On the contrary, greater information asymmetry, complexity, uncertainty, and lack of public information for patent-intensive firms can impede analysts' ability to provide informative earnings forecasts [51,52]. Previous studies have assumed the market rationality in which stock prices fully reflect available information in the market.…”
Section: Hypothesis 3a Analyst Forecasts Are Affected By Patent Citamentioning
confidence: 99%
“…Patents are an output measure of the R&D process and thus contain information on the success of a firm's innovation strategy [63]. Because R&D investment is immediately expensed regardless of its success, market participants usually have little reliable and economically relevant information on R&D [51,52,64,65]. Managers can communicate about the value of R&D activities through voluntary disclosures [66].…”
Section: Hypothesis 3a Analyst Forecasts Are Affected By Patent Citamentioning
confidence: 99%
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