Innovation, Patents and Cash Flow

CEPR Discussion Paper Series 1432

Posted: 17 Sep 1996

See all articles by Paul A. Geroski

Paul A. Geroski

London Business School; Centre for Economic Policy Research (CEPR)

John Van Reenen

London School of Economics - Centre for Economic Performance (CEP); Stanford Graduate School of Business; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

Chris F. Walters

London Business School

Date Written: July 1996

Abstract

In this paper we estimate a dynamically recursive model of the relationship between innovations, patents and cash flow. Our results suggest that: 1) lagged patents are significant predictors of current innovation, but lagged innovations do not affect the conditional expectation of current patents; 2) patents are influenced primarily by advances in the science base as measured by R & D intensity and spillovers, while innovations are more sensitive to cash flow and demand shocks; 3) innovations have a greater impact on cash flow than patents; and 4) both patents and innovations show strong history dependence. We use our model to simulate the effects of spending $500m on any one of three different types of traditional government policies designed to support innovative activities of firms (non-discretionary R & D subsidies, cuts in corporate tax and stimulation of macroeconomic demand growth). These simulations suggest that the role for state intervention in promoting technological advance is decidedly limited.

JEL Classification: N2, O3, O0

Suggested Citation

Geroski, Paul A. and Van Reenen, John Michael and Walters, Chris F., Innovation, Patents and Cash Flow (July 1996). CEPR Discussion Paper Series 1432. Available at SSRN: https://ssrn.com/abstract=4218

Paul A. Geroski (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
+44 20 7262 5050 (Phone)
+44 20 7402 0718 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

John Michael Van Reenen

London School of Economics - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6976 (Phone)
+44 20 7955 6848 (Fax)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom
+44 20 7240 6740 (Phone)
+44 20 7240 6136 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Chris F. Walters

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,268
PlumX Metrics