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Measuring Innovation Around the World

50 Pages Posted: 10 Feb 2017 Last revised: 16 Jul 2017

Ping-Sheng Koh

ESSEC Business School

David M. Reeb

National University of Singapore

Elvira Sojli

UNSW Business School, School of Banking and Finance; RSM Erasmus University

Wing Wah Tham

University of New South Wales (UNSW)

Date Written: February 9, 2017

Abstract

Research on corporate innovation often focuses on firms with positive US patent activity and reported R&D, thereby excluding over 90% of the firms in Compustat. By exploiting data from 30 global patent offices, we investigate the nature of missing innovation data in the US and around the world. Our central research question is how studies of innovation, or those that rely on measures of innovation as a control variable, should assess firms without reported R&D or patent activity. Our preliminary analyses indicate systematic and predictable patterns across firms and countries for missing patents and R&D. We then compare the empirical efficacy of excluding firms without US patents or without reported R&D to simple replacement methods, and to various econometric solutions for missing innovation data. We show how excluding or deleting firms without US patents or reported R&D, even in studies of just US firms, provides biased coefficient estimates and standard errors. We also demonstrate how the biases from simply excluding the missing observations lead to specific distortions in tests related to corporate growth and country level innovation capacity. We then discuss best practices and provide specific guidelines in handling missing R&D and patent data.

Keywords: Disclosure, R&D Efficiency, R&D Bias, Patent Bias, Innovation, Missing Data, Measuring Innovation

Suggested Citation

Koh, Ping-Sheng and Reeb, David M. and Sojli, Elvira and Tham, Wing Wah, Measuring Innovation Around the World (February 9, 2017). Available at SSRN: https://ssrn.com/abstract=2914677

Ping-Sheng Koh

ESSEC Business School ( email )

5 Nepal Park
139408
Singapore
+65 6413 9737 (Phone)

David M. Reeb

National University of Singapore ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://www.davidreeb.net

Elvira Sojli (Contact Author)

UNSW Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

HOME PAGE: http://sites.google.com/site/esojli/

RSM Erasmus University ( email )

Finance Department T8-44
Burgemeester Oudlaan 50, PO Box 1738
Rotterdam, 3000DR
Netherlands
0031104082824 (Phone)

HOME PAGE: http://www.rsm.nl/people/elvira-sojli/

Wing Wah Tham

University of New South Wales (UNSW)

Sydney, NSW 2052
Australia

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