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  • 2022
  • Working Paper
  • HBS Working Paper Series

Standing on the Shoulders of Science

By: Joshua Lev Krieger, Monika Schnitzer and Martin Watzinger
  • Format:Print
  • | Language:English
  • | Pages:83
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Abstract

Today's innovations rely on scientific discoveries of the past, yet only some corporate R&D builds directly on scientific output. In this paper, we analyze U.S. patents to investigate how firms generate value by building on prior art "closer" to science and establish three new facts about the relationship between science and the value of inventions. First, we show that patent value is decreasing in distance-to-science. Patents building directly on scientific publications are on average 26% more valuable than patents in the same technology which are disconnected from science. Patents closer to science are also more likely to be in the tails of the value distribution (i.e., greater risk and greater reward). Next, we use patent text analysis to show that patent value increases with patent novelty. Third, we find that science-intensive patents are more novel. We discuss firm heterogeneity and the causes behind the science premium. Overall, firms that consistently use science for invention produce higher value patents generally, and especially when they "build on the shoulders" of their own scientific work.

Keywords

Patent Novelty; Value Capture; Science; Patents; Valuation; Research and Development

Citation

Krieger, Joshua Lev, Monika Schnitzer, and Martin Watzinger. "Standing on the Shoulders of Science." Harvard Business School Working Paper, No. 21-128, June 2021. (Revised September 2022.)
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About The Author

Joshua Lev Krieger

Entrepreneurial Management
→More Publications

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More from the Authors
  • Find and Replace: R&D Investment Following the Erosion of Existing Products By: Joshua L. Krieger, Xuelin Li and Richard T. Thakor
  • Are Transformational Ideas Harder to Fund? Resource Allocation to R&D Projects at a Global Pharmaceutical Firm By: Joshua Krieger and Ramana Nanda
  • AppHarvest: Rebuilding the Appalachian Economy Through Agriculture By: Joshua Lev Krieger, William R. Kerr and Bailey McAfee
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