Iain Cockburn and Zvi Griliches
The article focuses on industry effects and appropriability measures in the stock market's valuation of R&D and patents. It was found that the responses to the questions about the effectiveness of patents as a mechanism for protecting the returns from innovation to be of some use. There is some evidence of an interaction between industry level measures of the effectiveness of patents and the market's valuation of a firm's past R&D and patenting performance, as well as its current R&D moves. There is no evidence, however, that other appropriability mechanisms differ enough across industries to leave measurable traces in such data. The basic message of this paper is consistent with earlier work. There is some interesting information in patent counts, but it is subject to much error. Data on R&D expenditures, where available, are stronger measures of input to the process by which firms produce technical innovation than patents are of its "output." This difficulty with the patents numbers is not really eased by adding industry-level information on their relative effectiveness as a means of securing returns from innovation.