Cumulative Innovation and Market Value: Evidence from Patent Citations

Journal Article (Journal Article)

If innovations are rapidly made obsolete by subsequent discoveries, firms may have lower ex ante incentives to invest in R&D. This article empirically demonstrates the relevance of this problem and shows that it might be mitigated if the inventing firm reabsorbs its 'spilled' knowledge in its later inventions. Using new data on sequences of patent citations, I estimate the relationship between a firm's stock market value and the citations it receives. Citations on which the firm builds in a future period are positively related to market value, whereas citations on which the firm does not build are negatively related to value. © 2011 The Author(s). The Economic Journal © 2011 Royal Economic Society.

Full Text

Duke Authors

Cited Authors

  • Belenzon, S

Published Date

  • March 1, 2012

Published In

Volume / Issue

  • 122 / 559

Start / End Page

  • 265 - 285

Electronic International Standard Serial Number (EISSN)

  • 1468-0297

International Standard Serial Number (ISSN)

  • 0013-0133

Digital Object Identifier (DOI)

  • 10.1111/j.1468-0297.2011.02470.x

Citation Source

  • Scopus