Working Paper: CEPR ID: DP13766
Authors: Monika Schnitzer; Joshua Krieger; Martin Watzinger
Abstract: Today's innovations rely on scientific discoveries of the past, yet only some corporate R&D builds directly on scientific output. In this paper, we analyze U.S. patents to investigate how firms generate value by building on prior art "closer" to science and establish three new facts about the relationship between science and the value of inventions.First, we show that patent value is decreasing in distance-to-science. Patents building directly on scientific publications are on average 26% more valuable than patents in the same technology which are disconnected from science. Patents closer to science are also more likely to be in the tails of the value distribution (i.e., greater risk and greater reward). Next, we use patent text analysis to show that patent value increases with patent novelty. Third, we find that science-intensive patents are more novel. We discuss firm heterogeneity and the causes behind the science premium. Overall, firms that consistently use science for invention produce higher value patents generally, and especially when they "build on the shoulders" of their own scientific work.
Keywords: science; innovation; patent value; R&D strategy; corporate innovation
JEL Codes: O30; O34; O33; O31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| distance to science (C49) | patent value (O34) |
| patent novelty (O34) | patent value (O34) |
| distance to science (C49) | patent novelty (O34) |