Estimates of Patent Rents from Firm Market Value
41 Pages Posted: 28 Jun 2006 Last revised: 29 Nov 2014
Date Written: November 1, 2007
The value of patent rents is an important quantity for policy analysis. However, estimates in the literature based on patent renewals might be understated. Market value regressions could provide validation, but they have not had clear theoretical foundations for estimating patent rents. I develop a simple model to make upper bound estimates of patent rents using regressions on Tobin's Q. I test this on a sample of US firms and find it robust to a variety of considerations. My estimates correspond well with estimates based on patentee behavior outside the pharmaceutical industry, but renewal estimates might be understated for pharmaceuticals.
Keywords: technology, patents, innovation, patent value, firm value
JEL Classification: O34, O38, K1
Suggested Citation: Suggested Citation