Patent Ownership Fragmentation and Market Value: An Empirical Analysis

37 Pages Posted: 2 Apr 2016

See all articles by Mahdiyeh Entezarkheir

Mahdiyeh Entezarkheir

University of Western Ontario - Huron University College

Date Written: March 30, 2016

Abstract

A higher fragmentation of patent ownership following the recent U.S. pro-patent shifts has built overlapping property rights or patent thickets for firms with cumulative innovations. This has made the use of other firms' innovations costlier, due to higher transaction costs, licensing fees, and the possibility of hold-up. Using a panel data on 2,441 publicly traded U.S. manufacturing firms from 1976 to 2002, I quantify costs of the fragmentation and find that patent thickets lower firms' expected profit and, consequently, their stock market valuation. I also find that firms with a large patent portfolio size experience a smaller effect, likely because stronger bargaining position lowers the occurrence of the hold-up problem for these firms. In addition, there is no systematic time effect from patent thickets on firms' market value with a large patent portfolio size.

Keywords: Innovation, Patent Portfolio, Patent Thicket, Market Value, Fragmentation

JEL Classification: L43, O31, O32, O34, O38

Suggested Citation

Entezarkheir, Mahdiyeh, Patent Ownership Fragmentation and Market Value: An Empirical Analysis (March 30, 2016). Available at SSRN: https://ssrn.com/abstract=2757304 or http://dx.doi.org/10.2139/ssrn.2757304

Mahdiyeh Entezarkheir (Contact Author)

University of Western Ontario - Huron University College ( email )

1349 Western Road
London, Ontario N6G1H3
Canada

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