Stakes and Stars: The Effect of Intellectual Human Capital on the Level and Variability of High-Tech Firms' Market Values

Michael R. Darby, Qiao Liu, Lynne G. Zucker

NBER Working Paper No. 7201
Issued in June 1999
NBER Program(s):Productivity, Innovation, and Entrepreneurship

High-tech firms are built much more on the intellectual capital of key personnel than on physical assets, and firms built around the best scientists are most likely to be successful in commercializing breakthrough technologies. As a result, such firms are expected to have higher market values than similar firms less well endowed. In this paper we develop and implement an option-pricing based technique for valuing these and similar intangible assets by examining the effect of ties to star scientists on the market value of new biotech firms. Since firms with more star ties are likely to have a greater probability per unit time of making a commercially valurable R&D breakthrough, we argue and confirm empirically that both the value of the firm and the likelihood of jumps in the value are increasing in the number of star ties. These effects can be financially as well as statistically significant: for two firms with mean values for other variables, the predicted increase in market value of a firm with one article written by a star as or with a firm employee is 7.3% or 16 million 1984 dollars compared to a firm with no articles.

download in pdf format
   (308 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w7201

Published: Darby, Michael R., Qiao Liu and Lynne G. Zucker. "High Stakes In High Technology: High-Tech Market Values As Options," Economic Inquiry, 2004, v42(3,Jul), 351-369.

Users who downloaded this paper also downloaded* these:
Zucker, Darby, and Brewer w4653 Intellectual Capital and the Birth of U.S. Biotechnology Enterprises
Zucker, Darby, and Armstrong w4946 Intellectual Capital and the Firm: The Technology of Geographically Localized Knowledge Spillovers
Link and Ruhm w14797 Public Knowledge, Private Knowledge: The Intellectual Capital of Entrepreneurs
Zucker and Darby w12172 Movement of Star Scientists and Engineers and High-Tech Firm Entry
Zucker and Darby w13547 Star Scientists, Innovation and Regional and National Immigration
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us