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Strategic patenting and software innovation

Noel, Michael and Schankerman, Mark (2013) Strategic patenting and software innovation. Journal of Industrial Economics, 61 (3). pp. 481-520. ISSN 0022-1821

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Identification Number: 10.1111/joie.12024

Abstract

Strategic patenting is widely believed to raise the costs of innovating, especially in industries characterised by cumulative innovation. This paper studies the effects of strategic patenting on R&D, patenting and market value in the computer software industry. We focus on two key aspects: patent portfolio size, which affects bargaining power in patent disputes, and the fragmentation of patent rights (‘patent thickets’) which increases the transaction costs of enforcement. We develop a model that incorporates both effects, as well as knowledge spill overs. Using panel data for 121 firms covering the period 1980–99, we show that strategic patenting and spill overs affect innovation and market value of software firms, that there is a patent premium accounting for 20 per cent of the returns to R&D, and that software firms do not appear to be trapped in a prisoners' dilemma of ‘excessive patenting.

Item Type: Article
Official URL: http://onlinelibrary.wiley.com/doi/10.1111/joie.12...
Additional Information: © 2013 The Editorial Board of The Journal of Industrial Economics and John Wiley & Sons Ltd
Divisions: Economics
STICERD
Subjects: H Social Sciences > HC Economic History and Conditions
T Technology > T Technology (General)
Sets: Departments > Economics
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Date Deposited: 01 Jul 2014 15:00
Last Modified: 20 Jan 2020 05:12
Projects: RES-107-28-0001
Funders: Microsoft Corporation, Center for Economic Performance at the London School of Economics, Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/57372

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