Patents and R and D at the Firm Level: A First Look

This is a first report from a larger study of inventive activity of U.S. firms and some of its consequences. It reports on the relationship between patents applied for and R&D expenditures based on data for 121 large corporations covering the 1968-1975 period. The main conclusion is that there is a statistically significant relationship between a firm's R&D expenditures and the number of patents it applied for and receives. This relationship is very strong in the cross-sectional dimension (squared partial correlations of .8 or higher). It is weaker in the within-firm time-series dimension (partial r[squared]'s of .2 to .3). Attempts to fit an unconstrained distributed lag relationship yields only significant coefficients for the first and last terms in the lag structure, indicating both a quick response of patenting to changes in R&D and a small but persistent effect of past R&D, the truncation of this long lag being reflected in a significant coefficient for R&D lagged five years. In spite of these difficulties, patent counts do measure something systematic and hence are worthy of further study.