Learning from the Joneses: Technology Spillover, Innovation Externality, and Stock Returns
45 Pages Posted: 13 May 2017 Last revised: 3 Dec 2018
Date Written: June 8, 2018
This paper studies the asset pricing implications of technology spillover, an important externality in innovation. Using patent and R&D data from 1982 to 2013, I find that firms with more technology spillover earn 7.7% higher annualized returns than firms with less technology spillover. The effect is independent of product market competition and is robust when I control for intangible capital. The results support models in which technology spillover enables learning from peers with respect to the technological uncertainty of existing ventures, and also increases innovation capacity for future ventures.
Keywords: technology spillover, externality, learning, innovation capacity, stock returns
JEL Classification: D64, G12, O3
Suggested Citation: Suggested Citation