Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits and Market Value

42 Pages Posted: 4 Jul 2004 Last revised: 18 Dec 2013

See all articles by Adam B. Jaffe

Adam B. Jaffe

Motu Economic and Public Policy Research; Brandeis University; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: 1986

Abstract

This paper presents evidence that firms' patents, profits and market value are systematically related to the"technological position" of firms' research programs. Further, firms are seen to "move" in technology space in response to the pattern of contemporaneous profits at different positions. These movements tend to erode excess returns."Spillovers" of R&D are modelled by examining whether the R&D of neighboring firms in technology space has an observable impact on the firm's R&D success. Firms whose neighbors do much R&D produce more patents per dollar of their own R&D,with a positive interaction that gives high R&D firms the largest benefit from spillovers. In terms of profit and market value, however, their are both positive and negative effects of nearby firms' R&D. The net effect is positive for high R&D firms, but firms with R&D about one standard deviation below the mean are made worse off overall by the R&D of others.

Suggested Citation

Jaffe, Adam B., Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits and Market Value (1986). NBER Working Paper No. w1815. Available at SSRN: https://ssrn.com/abstract=242123

Adam B. Jaffe (Contact Author)

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