Patents to Products: Product Innovation and Firm Dynamics

74 Pages Posted: 8 May 2020

See all articles by David Argente

David Argente

Pennsylvania State University

Salomé Baslandze

Federal Reserve Bank of Atlanta

Douglas Hanley

University of Pittsburgh

Sara Moreira

Northwestern University

Multiple version iconThere are 3 versions of this paper

Date Written: May 2020

Abstract

We study the relationship between patents and actual product innovation in the market, and how this relationship varies with firms' market share. We use textual analysis to create a new data set that links patents to products of firms in the consumer goods sector. We find that patent filings are positively associated with subsequent product innovation by firms, but at least half of product innovation and growth comes from firms that never patent. We also find that market leaders use patents differently from followers. Market leaders have lower product innovation rates, though they rely on patents more. Patents of market leaders relate to higher future sales above and beyond their effect on product innovation, and these patents are associated with declining product introduction on the part of competitors, which is consistent with the notion that market leaders use their patents to limit competition. We then use a model to analyze the firms' patenting and product innovation decisions. We show that the private value of a patent is particularly high for large firms as patents protect large market shares of existing products.

Keywords: creative destruction, growth, Innovation, patent value, patents, productivity

JEL Classification: O3, O4

Suggested Citation

Argente, David and Baslandze, Salome and Hanley, Douglas and Moreira, Sara, Patents to Products: Product Innovation and Firm Dynamics (May 2020). CEPR Discussion Paper No. DP14692, Available at SSRN: https://ssrn.com/abstract=3594326

David Argente (Contact Author)

Pennsylvania State University ( email )

606 Kern Building
State College, PA 16801
United States

Salome Baslandze

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States
30309 (Fax)

HOME PAGE: http://https://sites.google.com/site/sabaslandze/home

Douglas Hanley

University of Pittsburgh ( email )

135 N Bellefield Ave
Pittsburgh, PA 15260
United States

HOME PAGE: http://doughanley.com/

Sara Moreira

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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