The Relationship Among Innovative Output, Productivity, and Profitability - A Test Comparing USPTO and EPO Data

17 Pages Posted: 5 Oct 2007

See all articles by Enrico Santarelli

Enrico Santarelli

University of Bologna - Department of Economics

Francesca Lotti

Bank of Italy

Date Written: June 2007

Abstract

The aim of this paper is to test whether patent-based indicators are still reliable measures of innovativeness in light of organizational changes in the field of Intellectual Property Rights (IPR) protection and the regulatory reforms already under way respectively at the U.S. Patent and Trademark Office (USPTO) and the European Patent Office (EPO). For most high-tech industries, patents represent an outcome of the production process and their number can be taken as a proxy for a firm's ability to improve its productivity growth and profitability. The case study reported here concerns the biotechnology industry in Italy, whose firms, by definition, have Intellectual Property (IP) activities in their portfolios. For this purpose, we use a unique data set which collects balance sheet items and patent information from EPO and USPTO. After linking firms' financial and production data with the patent information, we estimate a modified knowledge production function in which the dependent variable is alternatively (labor) productivity growth and profitability. Our findings show that only patents with the EPO, along with larger firm size, have a statistically significant relationship with productivity growth and profitability. This suggests that firms pursue different strategies when patenting with the USPTO and the EPO, and that this difference reflects statutory changes made to the former during the relevant period.

Keywords: IP Protection, Productivity, Profitability, Biotechnology Industry, Italy

JEL Classification: L25, L65, O34

Suggested Citation

Santarelli, Enrico and Lotti, Francesca, The Relationship Among Innovative Output, Productivity, and Profitability - A Test Comparing USPTO and EPO Data (June 2007). Jena Economic Research Paper No. 2007-020, Available at SSRN: https://ssrn.com/abstract=1019431 or http://dx.doi.org/10.2139/ssrn.1019431

Enrico Santarelli (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli, 2
I-40126 Bologna
Italy
+39 051 2098487 (Phone)

HOME PAGE: http://www2.dse.unibo.it/santarel

Francesca Lotti

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

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