A Text-Based Analysis of Corporate Innovation

85 Pages Posted: 1 Jul 2016 Last revised: 9 Jun 2019

See all articles by Gustaf Bellstam

Gustaf Bellstam

University of Colorado at Boulder - Leeds School of Business

Sanjai Bhagat

University of Colorado at Boulder - Department of Finance

J. Anthony Cookson

University of Colorado at Boulder - Leeds School of Business

Date Written: April 10, 2019

Abstract

We develop a new measure of innovation using a textual analysis of analyst reports of S&P500 firms. Our text-based measure gives a useful description of innovation by firms with and without patenting and R&D. For non-patenting firms, the measure identifies innovative 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 innovative non-patenting firms.

Keywords: Innovation, Text Analysis, Analyst Reports, Patenting

JEL Classification: O3, G3, M41

Suggested Citation

Bellstam, Gustaf and Bhagat, Sanjai and Cookson, J. Anthony, A Text-Based Analysis of Corporate Innovation (April 10, 2019). Available at SSRN: https://ssrn.com/abstract=2803232 or http://dx.doi.org/10.2139/ssrn.2803232

Gustaf Bellstam

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Sanjai Bhagat

University of Colorado at Boulder - Department of Finance ( email )

Campus Box 419
Boulder, CO 80309
United States
303-492-7821 (Phone)

J. Anthony Cookson (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

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