A Text-Based Analysis of Corporate Innovation

We develop a new measure of innovation using a textual analysis of analyst reports of S&P500 firms. Our text-based measure gives a useful description of innovation by firms with and without patenting and R&D. For non-patenting firms, the measure identifies innovative firms that adopt novel technologies and innovative business practices (e.g., Walmart’s cross- geography logistics). For patenting firms, the text-based measure strongly correlates with valuable patents, which likely capture true innovation. The text-based measure robustly forecasts greater firm performance and growth opportunities for up to four years, and these value implications hold just as strongly for innovative non-patenting firms.

Keywords: Innovation, Text Analysis, Analyst Reports, Patenting

JEL Classification: O3, G3, M41

Suggested Citation: Suggested Citation

Bellstam, Gustaf and Bhagat, Sanjai and Cookson, J. Anthony, A Text-Based Analysis of Corporate Innovation (April 10, 2019). Available at SSRN: https://ssrn.com/abstract=2803232 or http://dx.doi.org/10.2139/ssrn.2803232