Patent Statistics as an Innovation Indicator? Evidence from the Hard Disk Drive Industry

Abstract

We assess the usefulness of patent statistics as an indicator of innovation, using a direct measure of innovation in the hard disk industry (1976--98). Three findings emerge: (1) Patents "predict" innovations better than a random guess, and a simple refinement makes them more useful; (2) conditional on actually innovating, conglomerates and larger firms patent more than specialized startups and smaller firms; and (3) patent reforms seem to make the patent-innovation relationship nonstationary. These results suggest researchers should use caution when comparing patents of different types of firms and across years.

Keywords: Innovation, Patent

JEL Classification: O30