Innovation and Market Value
Recent research on financial market valuation of the knowledge assets of publicly traded firms is surveyed. The motivation for using a market value equation to price knowledge assets is discussed and the theory behind this equation is briefly presented. Then the empirical literature that relates Tobin's q or the market to book value ratio to R&D and patent measures is surveyed and new results based on United States data through 1995 are presented. The conclusion is that the market value of the modern manufacturing corporation is strongly related to its knowledge assets, and that patent measures contain information about this value above and beyond that conveyed by the usual R&D measures.
Published: Productivity, Innovation and Economic Performance, Barrell, Ray, Geoffrey Mason and Mary O'Mahoney, eds., Cambridge: Cambridge University Press, 2000.