Technology spillover effects and patent announcements

Abstract

Technological innovations create value for the innovating firm and spillover effects on peer firms. This paper proposes a new methodology to infer technology spillover effects from patents: Around patent announcements, investors incorporate negative spillovers into stock prices of close rivals to the innovating firm (competition effects) and positive spillovers for peer firms that can learn from the patented technology (learning effects). Competition effects are six times larger than learning effects and amount to 25 percent of the private patent value. Studying patents allows for two novel insights. First, competition spillover effects have become less pronounced after 2000. I show that the American Inventors Protection Act of 1999 diminished the private patent value and thus reduced competition spillovers on close product rivals. Second, the labor mobility of inventors shows that peer firms learn by hiring new inventors.

Keywords: Technology spillover effects, patent announcements, learning effects, competition effects, inventor mobility

JEL Classification: G14, E32, O31, O33, O47