Pricing Technological Innovators: Patent Intensity and Life-Cycle Dynamics

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See all articles by Jan Bena

Jan Bena

University of British Columbia - Sauder School of Business

Adlai J. Fisher

University of British Columbia (UBC) - Sauder School of Business

Jiri Knesl

Said Business School, University of Oxford

Julian Vahl

affiliation not provided to SSRN

Date Written: September 6, 2022

Abstract

Technological innovators are priced differently than other firms, earning high stock returns controlling for standard factors, with less punishment for high capital investment and weak profitability. We create the persistent new firm variable patent intensity (PI), patents received divided by market capitalization, available from 1926. On average, high PI firms account for ten percent of CRSP market value but generate over half of five-year-forward public-market patenting. Aged portfolios and standard factors show high alpha and low profitability lasting more than a decade past formation. Adding an expected growth factor, alphas become insignificant at most horizons, and loadings show strong life-cycle dynamics: high but declining growth, aggressive and increasing investment, and weak but improving profitability.

Keywords: technological innovation, patent intensity, stock returns, life-cycle dynamics

JEL Classification: G12, E20

Suggested Citation

Bena, Jan and Fisher, Adlai J. and Knesl, Jiri and Vahl, Julian, Pricing Technological Innovators: Patent Intensity and Life-Cycle Dynamics (September 6, 2022). Available at SSRN: https://ssrn.com/abstract=

Jan Bena

University of British Columbia - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
+1 604 822 8490 (Phone)

HOME PAGE: http://www.janbena.com

Adlai J. Fisher

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8331 (Phone)
604-822-4695 (Fax)

HOME PAGE: http://finance.sauder.ubc.ca/~fisher

Jiri Knesl (Contact Author)

Said Business School, University of Oxford ( email )

Said Business School
Park End Street
Oxford, OX1 1HP
Great Britain
07444308718 (Phone)
OX1 1HP (Fax)

HOME PAGE: http://https://sites.google.com/view/knesljiri/home

Julian Vahl

affiliation not provided to SSRN

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