An Empirical Analysis of the Relations between Patent Variables and Firm Value

Abstract

This paper analyzed the relationship between R&D activities and firm value by using patent data provided by USPTO. We analyzed 7 Japanese firms listed on Forbes Global 2000 indexed as “Consumer Electronics.” Many former researches, by simply using these variables as stock/flow of the intangible assets, failed to explicitly explain the process in which R&D and patents effect the firm value. In focusing on the effect of R&D stocks on net profits, we overcame this limitation by using patent variables ratios which represent different aspects of R&D activities. Our panel data analysis shows that the increase of each variables significantly explains the increase of Tobin's Q. This does not only reaffirm the importance of patent related activities on firm value, but also indicate that these variables can be the useful proxies for assessing firm's innovation capability.