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Patents, real options and firm performance

By Nick Bloom and John Van Reenen

Abstract

Analysing the new IFS-Leverhulme database on over 200 major British firms since 1968 we show that patents have an economically and statistically significant impact on firm-level productivity and market value. While patenting feeds into market values immediately it appears to have a slower effect on productivity. This generates valuable real options because patents provide exclusive rights to develop new innovations, enabling firms to delay investments. Higher market uncertainty, which increases the value of real options, reduces the impact of new patents on productivity. If the government's policy to reduce uncertainty is successful then this should increase the productivity of Britain's knowledge capital

Topics: HB Economic Theory, HD Industries. Land use. Labor
Publisher: Wiley-Blackwell on behalf of the Royal Economic Society
Year: 2002
DOI identifier: 10.1111/1468-0297.00022
OAI identifier: oai:eprints.lse.ac.uk:1451
Provided by: LSE Research Online
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