The Market Value of R&D, Patents, and Trademarks

Abstract

Firms are organizations that combine a broad range of different assets and resources to develop, manufacture, and sell their products. Besides physical assets such as property, plants and equipment, firms have intangible assets that become increasingly important. Intangible assets include, among others, knowledge assets, customer networks, brands, and reputation. Financial investors assess firms' tangible and intangible assets and form expectations about their future performance. Research has frequently found that knowledge assets such as R&D investments and patents contribute to company values in financial markets (e.g., Blundell et al., 1999; Cockburn and Griliches, 1988; Griliches, 1981; Hall et al., 2005). The economic value of other intangible assets has rarely been studied although other IP rights, including trademarks, are increasingly important for companies. With few exceptions (Bosworth and Rogers, 2001; Greenhalgh and Rogers, 2006a, 2006b), trademark rights were not considered in the discourse of evaluating the economic value of intangible assets. Compared to patents, they are rather invisible in economic research. While patents are regularly and extensively investigated in the field of industrial organization, this is not the case for trademarks although related issues such as product differentiation, product positioning, brands, and advertising have been considered (Cabral, 2000a; Church and Ware, 2006; Tirole, 2003). Graham and Somaya (2006) and Mendonça et al. (2004) also note that the paucity of research on trademarks is surprising given their importance for companies to protect their brands.

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