A Generalized KPSS Measure of Patent Value

The previous studies rely on the citation-based measure cannot directly reflect patents’ economic value. Hence, Kogan et al. (2017) (KPSS hereafter) proposed a novel measure by relating the granted patent to the stock market response. However, the value of the rejected patents is ignored. Therefore, we generalize KPSS’s measure by jointly considering the granted and rejected patents in a unified framework. We theoretically prove that our measure nests KPSS when the variation of rejected patents vanishes. Our measure is significantly correlated with patent citations. Furthermore, we find that the patent value only accounts for 5.62% of total assets in China