Patenting activity or innovative originality?

Abstract

We re‐examine the cross‐sectional stock return predictability of innovative originality documented in the 2018 paper by Hirshleifer et al. and introduce two measures of patenting activity: patent existence and patent counts. As firms with zero patents have zero innovative originality, we conjecture and find a high correlation between patenting activity measures and innovative originality. The findings of Hirshleifer et al. do not hold when we control for patenting activity. Our results highlight that simple patenting activity measures capture a significant portion of innovative originality, and hence need to be adequately controlled for in future innovation studies.

The effect of customer-base concentration on the relationship between patents and financial performance

“…Therefore, a firm's patenting activity is seen as a way to achieve value appropriation (Holgersson and Granstrand, 2022). Consistent with this idea, some studies report that firmlevel patenting activity has a positive effect on firm performance (Bedford et al, 2021;Dang and Motohashi, 2015;Mann and Sager, 2007;Maresch et al, 2016;Wang et al, 2020).…”

“…Our analysis shows that increasing the degree of customer-base concentration is an effective way to improve the performance of firm-level patenting activity. The direct effect of firm-level patenting activity has been repeatedly analyzed in previous research (Artz et al, 2010;Bedford et al, 2021;Decarolis and Deeds, 1999;Ernst, 2001;Mann and Sager, 2007;Pandit et al, 2011;Wang et al, 2020); however, its impact has been a source of contention among researchers. By identifying a moderating factor and advancing the interpretation of past conflicting results, we contribute to patent research.…”

“…By making it more difficult for competitors to imitate developed technologies, firms' patenting activities can create a competitive advantage (Decarolis, 2003;Liebeskind, 1996;Teece, 1986). In fact, several studies have reported that firm patenting activity has a positive effect on financial performance (Bedford et al, 2021;Dang and Motohashi, 2015;Mann and Sager, 2007;Maresch et al, 2016;Wang et al, 2020). However, there are also numerous studies that reported a negative relationship between patenting activity and firm performance (Artz et al, 2010;Decarolis and Deeds, 1999;Pandit et al, 2011;Suh and Hwang, 2010).…”

“…By making it more difficult for competitors to imitate developed technologies, firms' patenting activities can create a competitive advantage (Decarolis, 2003; Liebeskind, 1996; Teece, 1986). In fact, several studies have reported that firm patenting activity has a positive effect on financial performance (Bedford et al. , 2021; Dang and Motohashi, 2015; Mann and Sager, 2007; Maresch et al.…”

Innovation, external technological environment and the total factor productivity of enterprises

“…As pointed out by Bedford et al (2020), patenting activity captures a significant portion of firm innovative originality. It is necessary to further examine the effect of patent protection policy.…”