Technological Opportunity and Spillovers of R&D : Evidence from Firms' Patents, Profits, and Market Value

Quantifies the effects of technological opportunity and R&D spillovers on the productivity of private sector R&D. The technological positions of the firms considered in this study are determined based on classifications of their U.S. patents. The 328 patent classifications are grouped into 49 categories for purposes of this analysis. Data used are for 432 manufacturing firms that had patents granted between 1969 and 1979. Results indicate that firms with research in areas where many other firms perform similar research have more patents per dollar of R&D, implying spillovers from or imitation of other firms. There is also a higher return to R&D as measured by accounting profits and market value. Further, firms that have very low R&D expenditures have lower profits and market value when their neighbors are R&D intensive. The study also finds that firms adjust their R&D technical composition, but further research is needed to link this to technological opportunity. By constructing a methodology for characterizing technological position of a firm's research program, spillover and technological opportunity are better able to be examined. (SRD)