Truncation Bias Corrections in Patent Data: Implications for Recent Research on Innovation
44 Pages Posted: 25 Mar 2015 Last revised: 26 Oct 2016
Date Written: October 25, 2016
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: Suggested Citation