A New Measure of Innovation

59 Pages Posted: 17 Jul 2015 Last revised: 27 Jul 2018

See all articles by Michael J. Cooper

Michael J. Cooper

University of Utah - David Eccles School of Business

Anne Marie Knott

Washington University in St. Louis - John M. Olin Business School

Wenhao Yang

University of South Carolina - Darla Moore School of Business

Date Written: July 1, 2018

Abstract

In asset pricing and corporate finance, researchers often desire to study the causes or consequences of innovation. We propose a new innovation measure, RQ, defined as the firm-specific output elasticity of R&D. We perform a battery of innovation tests using the new RQ measure. We find that RQ is strong and statistically significant in common innovation tests from the literature, even after controlling for other innovation measures. In contrast, many of the literature’s previous innovation measures are less robust in our tests. Our results suggest that RQ may serve as a new variable in innovation studies.

Keywords: Innovation, Research Quotient, Firm Value, Patents, Citations

JEL Classification: O31, O32, G12, G14

Suggested Citation

Cooper, Michael J. and Knott, Anne Marie and Yang, Wenhao, A New Measure of Innovation (July 1, 2018). Available at SSRN: https://ssrn.com/abstract=2631655 or http://dx.doi.org/10.2139/ssrn.2631655

Michael J. Cooper (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

Anne Marie Knott

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1156
St. Louis, MO 63130-4899
United States

Wenhao Yang

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States

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