Innovation in Mature Firms: A Text-Based Analysis
78 Pages Posted: 1 Jul 2016 Last revised: 13 Dec 2017
Date Written: August 31, 2017
Abstract We develop a new measure of innovation using a textual analysis of analyst reports. Our text-based measure gives a useful description of innovation by mature firms with and without patenting and R&D. For non-patenting firms, the measure identifies firms that adopt novel technologies and innovative business practices (e.g., Walmart’s cross-geography logistics). For patenting firms, the text-based measure strongly correlates with valuable patents, which likely capture true innovation. The text-based measure robustly forecasts greater firm performance and growth opportunities for up to four years, and these value implications hold just as strongly for non-patenting firms.
Keywords: Innovation, Text Analysis, Analyst Reports, Patenting
JEL Classification: O3, G3, M41
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