Property Rights, Firm Size and Investments in Innovation: Evidence from the America Invents Act
May 2025
Working Paper Number:
CES-25-31
Abstract
I analyze whether a change in patent systems differentially affects firm-level innovation investments at patent-valuing firms of different sizes. Using legally required, economically representative, U.S. Census Bureau microdata, I separate firms into groups based on a firm's response to a question asking it to rank the degree of patent importance to its business and firm-size. I then measure how firms' innovation inputs/outputs respond to the America Invents Act (AIA). Results show the AIA reduced innovation investments at smaller, patent-valuing firms while increasing innovation investments at larger, patent-valuing firms, highlighting differential firm-size effects of patent policy and policy's importance to investments.
Document Tags and Keywords
Keywords
Keywords are automatically generated using KeyBERT, a powerful and innovative
keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant
keywords.
By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the
text, highlighting the most significant topics and trends. This approach not only enhances searchability but
provides connections that go beyond potentially domain-specific author-defined keywords.
:
investment,
growth,
technological,
invention,
corporation,
investing,
venture,
investor,
innovation,
inventory,
patent,
economically,
patenting,
invest,
prospect,
innovative,
firms patents,
patents firms,
firm innovation,
firm patenting,
innovation patenting
Tags
Tags are automatically generated using a pretrained language model from spaCy, which excels at
several tasks, including entity tagging.
The model is able to label words and phrases by part-of-speech,
including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are
identified to contain references to specific institutions, datasets, and other organizations.
:
National Science Foundation,
Longitudinal Business Database,
Initial Public Offering,
North American Industry Classification System,
Patent and Trademark Office,
Census Bureau Business Register,
Census Bureau Disclosure Review Board,
Business Research and Development and Innovation Survey,
Federal Statistical Research Data Center
Similar Working Papers
Similarity between working papers are determined by an unsupervised neural
network model
know as Doc2Vec.
Doc2Vec is a model that represents entire documents as fixed-length vectors, allowing for the
capture of semantic meaning in a way that relates to the context of words within the document. The model learns to
associate a unique vector with each document while simultaneously learning word vectors, enabling tasks such as
document classification, clustering, and similarity detection by preserving the order and structure of words. The
document vectors are compared using cosine similarity/distance to determine the most similar working papers.
Papers identified with 🔥 are in the top 20% of similarity.
The 10 most similar working papers to the working paper 'Property Rights, Firm Size and Investments in Innovation: Evidence from the America Invents Act' are listed below in order of similarity.
-
Working PaperPatents, Innovation, and Market Entry
September 2023
Working Paper Number:
CES-23-45
Do patents facilitate market entry and job creation? Using a 2014 Supreme Court decision that limited patent eligibility and natural language processing methods to identify invalid patents, I find that large treated firms reduce job creation and create fewer new establishments in response, with no effect on new firm entry. Moreover, companies shift toward innovation aimed at improving existing products consistent with the view that patents incentivize creative destruction.View Full Paper PDF
-
Working PaperReconciling the Firm Size and Innovation Puzzle
March 2016
Working Paper Number:
CES-16-20RR
There is a prevailing view in both the academic literature and the popular press that firms need to behave more entrepreneurially. This view is reinforced by a stylized fact in the innovation literature that R&D productivity decreases with size. However, there is a second stylized fact in the innovation literature that R&D investment increases with size. Taken together, these stylized facts create a puzzle of seemingly irrational behavior by large firms--they are increasing spending despite decreasing returns. This paper is an effort to resolve that puzzle. We propose and test two alternative resolutions: 1) that it arises from mismeasurement of R&D productivity, and 2) that firm size endogenously drives R&D strategy, and that the returns to R&D strategies depend on scale. We are able to resolve the puzzle under the first tack--using a recent measure of R&D productivity, RQ, we find that both R&D spending and R&D productivity increase with scale. We had less success with the second tack--while firm size affects R&D strategy in the manners expected by theory, there is no strategy whose returns decrease in scale. Taken together, our results are consistent with the Schumpeter view that large firms are the major engine of growth, they both spend more in aggregate than small firms, and are more productive with that spending. Moreover the prescription that firms should behave more entrepreneurially, should be treated with caution--one small firm strategy has lower returns to scale than its large firm counterpart.View Full Paper PDF
-
Working PaperR&D or R vs. D? Firm Innovation Strategy and Equity Ownership
April 2020
Working Paper Number:
CES-20-14
We analyze a unique dataset that separately reports research and development expenditures for a large panel of public and private firms. Definitions of 'research' and 'development' in this dataset, respectively, correspond to definitions of knowledge 'exploration' and 'exploitation' in the innovation theory literature. We can thus test theories of how equity ownership status relates to innovation strategy. We find that public firms have greater research intensity than private firms, inconsistent with theories asserting private ownership is more conducive to exploration. We also find public firms invest more intensely in innovation of all sorts. These results suggest relaxed financing constraints enjoyed by public firms, as well as their diversified shareholder bases, make them more conducive to investing in all types of innovation. Reconciling several seemingly conflicting results in prior research, we find private-equity-owned firms, though not less innovative overall than other private firms, skew their innovation strategies toward development and away from research.View Full Paper PDF
-
Working PaperInnovation and Appropriability: Revisiting the Role of Intellectual Property
March 2022
Working Paper Number:
CES-22-09
It is more than 25 years since the authors of the Yale and Carnegie surveys studied how firms seek to protect the rents from innovation. In this paper, we revisit that question using a nationally representative sample of firms over the period 2008-2015, with the goal of updating and extending a set of stylized facts that has been influential for our understanding of the economics of innovation. There are five main findings. First, while patenting firms are relatively uncommon in the economy, they account for an overwhelming share of R&D spending. Second, utility patents are considered less important than other forms of IP protection, like trade secrets, trademarks, and copyrights. Third, industry differences explain a great deal of the level of firms' engagement with IP, with high-tech firms on average being more active on all forms of IP. Fourth, we do not find any significant difference in the use of IP strategies across firms at different points of their life cycle. Lastly, unlike age, firms of different size appear to manage IP significantly differently. On average, larger firms tend to engage much more extensively in the protection of IP, and this pattern cannot be easily explained by differences in the type of R&D or innovation produced by a firm. We also discuss the implications of these findings for innovation research and policy.View Full Paper PDF
-
Working PaperOutsourced R&D and GDP Growth
March 2016
Working Paper Number:
CES-16-19
Endogenous growth theory holds that growth should increase with R&D. However coarse comparison between R&D and US GDP growth over the past forty years indicates that inflation scientific labor increased 2.5 times, while GDP growth was at best stagnant. The leading explanation for the disconnect between theory and the empirical record is that R&D has gotten harder. I develop and test an alternative view that firms have become worse at it. I find no evidence R&D has gotten harder. Instead I find firms' R&D productivity declined 65%, and that the main culprit in the decline is outsourced R&D, which is unproductive for the funding firm. This offers hope firms' R&D productivity and economic growth may be fairly easily restored by bringing outsourced R&D back in-house.View Full Paper PDF
-
Working PaperAn Option-Value Approach to Technology in U.S. Maufacturing: Evidence from Plant-Level Data
July 2000
Working Paper Number:
CES-00-12
Numerous empirical studies have examined the role of firm and industry heterogeneity in the decision to adopt new technologies using a Net Present Value framework. However, as suggested by the recently developed option-value theory, these studies may have overlooked the role of investment reversibility and uncertainty as important determinants of technology adoption. Using the option-value investment model as my underlying theoretical framework, I examine how these two factors affect the decision to adopt three advanced manufacturing technologies. My results support the option-value model's prediction that plants operating in industries facing higher investment reversibility and lower degrees of demand and technological uncertainty are more likely to adopt advanced manufacturing technologies.View Full Paper PDF
-
Working PaperFirm Finances and Responses to Trade Liberalization: Evidence from U.S. Tariffs on China
November 2021
Working Paper Number:
CES-21-37
This paper examines the relationship between a firm's finances and its response to trade liberalization. Using a landmark change in U.S. tariff policy vis-'-vis Chinese imports and micro level data from the U.S. Census Bureau, I find larger manufacturing job losses in better capitalized firms - those with less leverage and more cash on hand. The effects concentrate in industries where weaker balance sheets are likely to lead to collateral and other borrowing constraints, helping rule out alternative explanations. Finally, domestic manufacturing job losses are not accompanied by greater reductions in sales or aggregate employment, but better capitalized firms do exhibit reduced input costs and increased productivity. These findings point to offshoring as the predominant firm response to trade liberalization and suggest a role for financial capacity in facilitating offshoring investments.View Full Paper PDF
-
Working PaperThe Role of R&D Factors in Economic Growth
November 2024
Working Paper Number:
CES-24-69
This paper studies factor usage in the R&D sector. I show that the usage of non-labor inputs in R&D is significant, and that their usage has grown much more rapidly than the R&D workforce. Using a standard growth decomposition applied to the aggregate idea production function, I estimate that at least 77% of idea growth since the early 1960s can be attributed to the growth of non-labor inputs in R&D. I demonstrate that a similar pattern would hold on the balanced growth path of a standard semi-endogenous growth model, and thus that the decomposition is not simply a by-product of rising research intensity. I then show that combining long-running differences in factor growth rates with non-unitary elasticities of substitution in idea production leads to a slowdown in idea growth whenever labor and capital are complementary. I conclude by estimating this elasticity of substitution and demonstrate that the results favor complimentarities.View Full Paper PDF
-
Working PaperMergers and Acquisitions in the United States: 1990-1994
September 1998
Working Paper Number:
CES-98-15
Business merger and acquisition activity has been brisk in the United States in the recent past. Yet very little information has been available to help researchers understand the effects of this activity on jobs, businesses, and the American economy. This paper takes a first look at examining merger and acquisition activity using the newly available Longitudinal Establishment and Enterprise Microdata (LEEM) file. The analysis focuses on industries, establishments, and employment by employment size of firm. A first-time comparison of establishments that were acquired and survived over the 1990-1994 period with those that survived but were not acquired finds that the acquired establishments experienced more job change and, in the end, more net job loss than the nonacquired establishments. Establishments in small firms that were acquired by new or large firms experienced especially rapid job growth; however; job losses in establishments acquired from large firms more than offset these job gains.View Full Paper PDF
-
Working PaperTaking the Leap: The Determinants of Entrepreneurs Hiring their First Employee
January 2016
Working Paper Number:
CES-16-48
Job creation is one of the most important aspects of entrepreneurship, but we know relatively little about the hiring patterns and decisions of startups. Longitudinal data from the Integrated Longitudinal Business Database (iLBD), Kauffman Firm Survey (KFS), and the Growing America through Entrepreneurship (GATE) experiment are used to provide some of the first evidence in the literature on the determinants of taking the leap from a non-employer to employer firm among startups. Several interesting patterns emerge regarding the dynamics of non-employer startups hiring their first employee. Hiring rates among the universe of non-employer startups are very low, but increase when the population of non-employers is focused on more growth-oriented businesses such as incorporated and EIN businesses. If non-employer startups hire, the bulk of hiring occurs in the first few years of existence. After this point in time relatively few non-employer startups hire an employee. Focusing on more growth- and employment-oriented startups in the KFS, we find that Asian-owned and Hispanic-owned startups have higher rates of hiring their first employee than white-owned startups. Female-owned startups are roughly 10 percentage points less likely to hire their first employee by the first, second and seventh years after startup. The education level of the owner, however, is not found to be associated with the probability of hiring an employee. Among business characteristics, we find evidence that business assets and intellectual property are associated with hiring the first employee. Using data from the largest random experiment providing entrepreneurship training in the United States ever conducted, we do not find evidence that entrepreneurship training increases the likelihood that non-employers hire their first employee.View Full Paper PDF
