Truncation Bias Corrections in Patent Data: Implications for Recent Research on Innovation

44 Pages Posted: 25 Mar 2015 Last revised: 26 Oct 2016

See all articles by Nishant Dass

Nishant Dass

Georgia Institute of Technology - Scheller College of Business

Vikram K. Nanda

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics

Steven Chong Xiao

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: October 25, 2016

Abstract

The paper reviews the effectiveness of various adjustment methods in correcting the truncation bias in patent data and the implications for existing studies. The NBER patents database was recently updated, extending the sample end-date of 2006 to 2010. The updated sample is largely free of truncation-bias over the period covered by the NBER-2006 sample, allowing us to evaluate the bias-adjustment methods. We find that adjustments based on historical distribution perform poorly towards the end of NBER-2006 sample. Furthermore, the bias is correlated with firm attributes. We re-examine multiple studies from the recent literature on innovation and show that findings based on the last few years of NBER-2006 data are not supported in the updated patent sample. We argue that studies using patent data should examine the robustness of their results to excluding the last 3-4 years of patent data and different adjustment methods.

Keywords: Innovation, Patents, NBER Patent Data, Truncation Bias

JEL Classification: G14, G30, O30

Suggested Citation

Dass, Nishant and Nanda, Vikram K. and Xiao, Steven Chong, Truncation Bias Corrections in Patent Data: Implications for Recent Research on Innovation (October 25, 2016). Available at SSRN: https://ssrn.com/abstract=2584221 or http://dx.doi.org/10.2139/ssrn.2584221

Nishant Dass

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-5109 (Phone)

HOME PAGE: http://scheller.gatech.edu/dass

Vikram K. Nanda

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics ( email )

2601 North Floyd Road
P.O. Box 830688
Richardson, TX 75083
United States

Steven Chong Xiao (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

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