F. M. Scherer

Citation Frequency and the Value of Patented Innovation

Through a survey, private economic value estimates were obtained on 964 inventions made in the United States and Germany and on which German patent renewal fees were paid to full-term expiration in, 1995. A search of subsequent U.S. and German patents yielded counts of citations to those patents. Patents renewed to full-term were significantly more highly cited than patents allowed to expire before their full term. The higher an inventions economic value estimate was, the more the patent was subsequently cited.

Citations, family size, opposition and the value of patent rights

Abstract We combine estimates of the value of patent rights from a survey of patent-holders with a set of indicator variables in order to model the value of patents. Our results suggest that the number of references to the patent literature as well as the citations a patent receives are positively related to its value. References to the non-patent literature are informative about the value of pharmaceutical and chemical patents, but not in other technical fields. Patents which are upheld in opposition and annulment procedures and patents representing large international patent families are particularly valuable.

Inter-Industry Technology Flows and Productivity Growth

An unusually rich data set was tapped to explore the relationship between research and development (R and D) and productivity growth. The most-important finding is that, with disaggregated data, the wrong lag hypothesis is not supported: there is no clear indication that the productivity slump of the 1970s resulted from a decrease in the marginal productivity of R and D. Also important is the evidence of substantial returns to used R and D, i.e., from internal-process work and the purchase of R and D-embodying products, but not (at least in industries with productivity indices based upon physical output or comprehensive price deflators) to the performance of product R and D. Given the fact that three-fourths of all industrial R and D is product-oriented, studies that fail to distinguish between the origination and use of R and D may suffer from appreciable specification errors. Further research using improved R and D and (especially) productivity data is plainly needed, among other things, to clarify the mystery of why estimated R and D-productivity relationships differ for productivity-data subsets of varying quality. 15 references, 3 tables.

The propensity to patent

Abstract This paper analyzes the relationship between 1974 RD among the exceptions, the tendency was toward diminishing returns. Variables measuring overseas sales, federal R&D support, diversification, scope of invention use, and invention type had only modest explanatory power. There was no significant evidence of disproportionate patent accumulation in the more highly concentrated industries.

Technology policy for a world of skew-distributed outcomes

Abstract This paper draws implications for technology policy from evidence on the size distribution of returns from eight sets of data on inventions and innovations attributable to private sector firms and universities. The distributions are all highly skew; the top 10% of sample members captured from 48 to 93 percent of total sample returns. It follows that programs seeking to advance technology should not be judged negatively if they lead to numerous economic failures; rather, emphasis should be placed on the relatively few big successes. To achieve noteworthy success with appreciable confidence, a sizeable array of projects must often be supported. The outcome distributions are sufficiently skewed that, even with large numbers of projects, it is not possible to diversify away substantial residual variability through portfolio strategies.

Patent Statistics as a Measure of Technical Change

This paper examines a question of long standing: How can one obtain operational indexes of inventive and innovative activity and technical change? Specifically, for a sample of fifty-seven pharmaceutical manufacturing firms, we attempt to determine how well a simple count of invention patents serves as a surrogate for two alternative measures of technical change: the number of research and development personnel employed, reflecting inputs into the innovative process, and the value of new product sales, which reflects outputs of the process.

THE PHARMACEUTICAL INDUSTRY

This Handbook chapter surveys the extensive body of research on the economics of the pharmaceutical industry (with peripheral attention paid also to regulated medical devices). Pharmaceuticals is one of the worlds most research-intensive industries, generating a continuing steam of new products that save lives and raise the quality of life. The discovery of new drugs has evolved over time from a decidedly empirical process to one based to a considerable degree upon fundamental scientific knowledge. Rich linkages have emerged between profit-seeking manufacturers and basic research performers such as universities and national laboratories. The safety and efficacy of new pharmaceutical products are stringently regulated in most industrialized nations, adding to clinical testing costs. Because of high expenditures on research, development, and clinical testing and because new products, once proven, might be imitated easily, patent protection is unusually important. The extension of patent protection to third-world nations under Uruguay Round Treaty mandates has precipitated vigorous policy debates. Patents, first-mover advantages, and the lack of good substitutes for significant new drugs often give rise to substantial monopoly power, against which many national governments have counterpoised a diverse panoply of price control mechanisms. When patents expire, however, generic substitutes often introduce vigorous price competition. The extent to which generics capture market share from the branded original drugs depends upon government regulatory policies, the reimbursement strategies of health care insurers, and the organization of health care provider institutions.

Research and Development Resource Allocation Under Rivalry

I. Returns and costs in the nonrivalrous case, 359. — II. The general rivalry problem, 363. — III. Specific duopoly models, 367. — IV. Solution concepts, 371. — V. Specific Cournot reaction patterns, 377. — VI. The N-firm problem, 389. — VII. Welfare implications, 392. — VIII. Conclusion, 394.

The profitability of mergers

Abstract Using data on 2,732 lines of business operated by U.S. manufacturing corporations, this paper analyzes the pre-merger profitability of acquisition targets and post-merger operating results for the years 1957–1977. Acquired companies are found to be extraordinarily profitable pre-merger, the more so, the smaller their size. Following merger, the profitability of acquired entities declined except among pooling-of-interests merger partners of roughly equal pre-merger size. The decline was larger than expected under Galtonian regression. This and the high divestiture rate for acquired entities point toward control loss as an explanation of the profit drop.

The weapons acquisition process: An economic analysis

This volume is the first publication resulting from a three-year research project at the Harvard Business School on the development of advanced weapons. It is based upon comprehensive historical case studies of twelve weapon system programs and seven commercial product developments, and upon more limited investigations of several specific research questions.