Patent Intensity, Firm Life-Cycle Dynamics and the Pricing of Technological Innovators

80 Pages Posted: 27 Sep 2022 Last revised: 11 Jan 2024

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

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

Date Written: September 6, 2022

Abstract

We introduce patent intensity (PI) - patents granted divided by market capitalization - to classify technological-innovator types starting from 1926. High-PI firms represent ten percent of total market capitalization but over half of five-year-forward public-company patenting. PI-sorted portfolios earn significant return spreads for a decade post-formation, with low turnover. Alphas controlling for standard factors are persistently large, and innovators are punished less for aggressive investment and weak profitability. Adding an expected growth factor resolves mispricing across horizons, with loadings showing high, declining growth, aggressive, increasing investment, and weak, improving profitability. Patent intensity captures life-cycle dynamics in fundamentals, loadings, and returns.

Keywords: Technological innovation, patent intensity, stock returns, firm life-cycle, risk dynamics

JEL Classification: G12, E20

Suggested Citation

Bena, Jan and Fisher, Adlai J. and Knesl, Jiri and Vahl, Julian, Patent Intensity, Firm Life-Cycle Dynamics and the Pricing of Technological Innovators (September 6, 2022). Proceedings of the EUROFIDAI-ESSEC Paris December Finance Meeting 2023, Available at SSRN: https://ssrn.com/abstract=4218260 or http://dx.doi.org/10.2139/ssrn.4218260

Jan Bena

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

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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

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

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