Invention Value, Inventive Capability and the Large Firm Advantage
Do large firms produce more valuable inventions, and if so, why? After confirming that large firms indeed produce more valuable inventions, we consider two possible sources: a superior ability to invent, or a superior ability to extract value from their inventions. We develop a simple model that discriminates between the two explanations. Using a sample of 2,786 public corporations, and measures of both patent quality and patent value, we find that, while average invention value rises with size, average invention quality declines, suggesting, per our model, that the large firm advantage is not due to superior inventive capability, but due to the superior ability to extract value. We provide evidence suggesting that this superior ability to extract value is due to greater commercialization capabilities of larger firms.
We thank Sharon Belenzon, Scott Rockart, Sharique Hasan and Daniel P Gross for their useful feedback. We also thank all seminar participants at the strategy seminar series at Fuqua School of Business for their thoughtful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- Larger firms tend to profit more from their inventions than do their smaller counterparts. In Invention Value, Inventive Capability,...
Ashish Arora & Wesley Cohen & Honggi Lee & Divya Sebastian, 2022. "Invention Value, Inventive Capability and the Large Firm Advantage," Academy of Management Proceedings, vol 2022(1).