Firm markups and the economic value of innovation

Martin, Ralf, Solorzano Mosquera, Jenniffer, Thomas, Catherine ORCID: 0000-0002-7783-9758 and Verhoeven, Dennis (2025) Firm markups and the economic value of innovation. International Journal of Industrial Organization, 102. ISSN 0167-7187

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Abstract

We examine the relationship between firms' markups and the economic value of their innovation, including both the private value captured by the innovating firm and the knowledge spillovers that benefit other firms. Using a sample of over 14,500 EU firms and 2,400 US firms granted patents between 2005 and 2014, we find that innovation by high-markup firms is more valuable privately and also creates more external value. These associations are robust to controlling for the stock of past innovation and to estimating innovation value in various ways.

Item Type:	Article
Additional Information:	© 2025 The Author(s)
Divisions:	Centre for Economic Performance Management
Subjects:	H Social Sciences > HB Economic Theory
JEL classification:	D - Microeconomics > D2 - Production and Organizations > D24 - Production; Cost; Capital and Total Factor Productivity; Capacity L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O31 - Innovation and Invention: Processes and Incentives O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O33 - Technological Change: Choices and Consequences; Diffusion Processes
Date Deposited:	01 Aug 2025 16:15
Last Modified:	16 Sep 2025 09:30
URI:	http://eprints.lse.ac.uk/id/eprint/129003

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