Invention value, inventive capability and the large firm advantage
By Ashish Arora, Wesley Cohen, Honggi Lee, Divya Sebastian
Research Policy | January 2023
DOI
doi.org/10.1016/j.respol.2022.104650
Citation
Arora, Ashish., Cohen, Wesley., Lee, Honggi., Sebastian, Divya. Invention value, inventive capability and the large firm advantage Research Policy doi.org/10.1016/j.respol.2022.104650.
Copyright
Research Policy, 2023
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Abstract
Do large firms produce more valuable inventions, and if so, why? After confirming that large firms indeed produce more valuable inventions, we consider two possible sources: a superior ability to invent, or a superior ability to extract value from their inventions. We develop a simple model that discriminates between the two explanations. Using a sample of 2,786 public corporations, and measures of both patent quality and patent value, we find that, while average invention value rises with size, average invention quality declines, suggesting, per our model, that the large firm advantage is not due to superior inventive capability, but due to the superior ability to extract value. We provide evidence suggesting that this superior ability to extract value is due to the greater commercialization capabilities of larger firms.

Divya Sebastian is an Assistant Professor of Strategy at the Indian School of Business (ISB). Her research explores how firms create and capture value from their inventions, with a particular focus on the geography of innovation. In recent work, she examines differences in the value of domestic versus overseas inventions. Her current research investigates the role of global talent in shaping firm innovation and performance.

Professor Sebastian earned her PhD in Strategy from the Fuqua School of Business at Duke University. She holds a B.A. (Hons.) in Economics from St. Stephen’s College, University of Delhi, and an M.A. in Applied Economics from the Centre for Development Studies, Jawaharlal Nehru University. Prior to her doctoral studies, she worked at the Center for Technology, Innovation and Economic Research (CTIER), a policy think tank in Pune, India.

Divya Sebastian
Divya Sebastian