Invention Value, Inventive Capability and the Large Firm Advantage

48 Pages Posted: 15 Aug 2022 Last revised: 9 Jun 2024

See all articles by Ashish Arora

Ashish Arora

Duke University - Fuqua School of Business; National Bureau of Economics Research; Duke Innovation & Entrepreneurship Initiative

Wesley M. Cohen

Duke University - Fuqua School of Business; Duke University - Department of Economics; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Honggi Lee

University of New Hampshire - Peter T. Paul College of Business and Economics

Divya Sebastian

Duke University - Fuqua School of Business

Date Written: August 2022

Abstract

Do large firms produce more valuable inventions, and if so, why? After confirming that large firms indeed produce more valuable inventions, we consider two possible sources: a superior ability to invent, or a superior ability to extract value from their inventions. We develop a simple model that discriminates between the two explanations. Using a sample of 2,786 public corporations, and measures of both patent quality and patent value, we find that, while average invention value rises with size, average invention quality declines, suggesting, per our model, that the large firm advantage is not due to superior inventive capability, but due to the superior ability to extract value. We provide evidence suggesting that this superior ability to extract value is due to greater commercialization capabilities of larger firms.

Suggested Citation

Arora, Ashish and Cohen, Wesley M. and Lee, Honggi and Sebastian, Divya, Invention Value, Inventive Capability and the Large Firm Advantage (August 2022). NBER Working Paper No. w30354, Available at SSRN: https://ssrn.com/abstract=4190176

Ashish Arora (Contact Author)

Duke University - Fuqua School of Business ( email )

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National Bureau of Economics Research

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Duke Innovation & Entrepreneurship Initiative ( email )

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Wesley M. Cohen

Duke University - Fuqua School of Business ( email )

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Durham, NC 27708-0120
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Duke University - Department of Economics

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National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Honggi Lee

University of New Hampshire - Peter T. Paul College of Business and Economics ( email )

Durham, NH
United States

Divya Sebastian

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

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