Does it Pay to Patent Green Innovations? Stock Market Reactions to Family and Nonfamily Firms’ Green Patents

Journal of Business Ethics

53 Pages Posted:

See all articles by Francesco Chirico

Francesco Chirico

Jonkoping University - Jonkoping International Business School (JIBS); Macquarie University, Macquarie Business School

Kimberly A. Eddleston

Northeastern University - Entrepreneurship and Innovation

Pankaj R Patel

affiliation not provided to SSRN

Date Written: January 24, 2025

Abstract

Are green patents granted to family firms perceived more favorably by the market than those granted to non-family firms? Using a sample of 8,918 green patents granted to family and non-family firms between 2014 and 2018, our study shows that it depends on the attributes of the green patent. Integrating the green innovation and family firm literatures with signaling theory, we develop a theoretical framework that highlights the need for family firms to balance their pursuit of green innovation with signals of innovation stability and due diligence so as to gain the greatest market value from their green patents. In contrast, we theorize that green patents offer nonfamily firms the greatest gain in market value when they signal innovation radicalness and newness. While our results show that the stock market reaction does not vary significantly between family and non-family firms, when we consider the attributes of green patents, we find that compared to nonfamily firms, family firms with longer green patent grant lags realize a more positive market reaction whereas those with higher patent radicalness experience a more negative market reaction. As such, our study suggests that the types of green patents that garner the greatest market value differ for family and nonfamily firms. The findings are robust to alternate family firm definitions, and additional robustness checks. 

Suggested Citation

Chirico, Francesco and Chirico, Francesco and Eddleston, Kimberly and Patel, Pankaj R, Does it Pay to Patent Green Innovations? Stock Market Reactions to Family and Nonfamily Firms’ Green Patents (January 24, 2025). Journal of Business Ethics, Available at SSRN: https://ssrn.com/abstract=

Francesco Chirico (Contact Author)

Jonkoping University - Jonkoping International Business School (JIBS) ( email )

Jönköping, 55111
Sweden

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Kimberly Eddleston

Northeastern University - Entrepreneurship and Innovation ( email )

Boston, MA 02115
United States

Pankaj R Patel

affiliation not provided to SSRN

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