Working Paper: CEPR ID: DP5701
Authors: Michael Noel; Mark Schankerman
Abstract: Strategic patenting is widely believed to raise the costs of innovating, especially in industries characterised by cumulative innovation. This paper studies the effects of strategic patenting on R&D, patenting and market value in the computer software industry. We focus on two key aspects: patent portfolio size which affects bargaining power in patent disputes, and the fragmentation of patent rights ('patent thickets') which increases the transaction costs of enforcement. We develop a model that incorporates both effects, together with R&D spillovers. Using panel data for the period 1980-99, we find evidence that both strategic patenting and R&D spillovers strongly affect innovation and market value of software firms.
Keywords: anticommons; market value; patent thickets; patents; R&D spillovers
JEL Codes: L43; L86; O31; O33; O34; O38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Greater patenting activity by technology rivals (O38) | Decrease in a firm's market value (G32) |
| Greater patenting activity by technology rivals (O38) | Decrease in a firm's R&D (O39) |
| Greater patenting activity by technology rivals (O38) | Decrease in a firm's patenting (O39) |
| Higher concentration of patent rights (O34) | Increase in market value (G19) |
| Higher concentration of patent rights (O34) | Decrease in R&D (O39) |
| Higher concentration of patent rights (O34) | Decrease in patenting activity (O39) |
| R&D spillovers (O36) | Increase in patenting (O39) |
| R&D spillovers (O36) | Increase in market value (G19) |
| Increase in patent stock (O34) | Increase in market value (G19) |