Patenting and Firm Growth: Evidence from US Manufacturing

Patents are one of the important outputs of innovation processes within firms, and have been a topic of extensive research recently, spurred in no little part by the publication of the NBER patent data (Hall, Jaffe and Trajtenberg, 2001) and the availability of patent data online (e.g. the USPTO website). This study uses name-matching procedures to create a new dataset that links the NBER patent data to firm data from the US Census Bureau. Our linked dataset covers more than 48,000 unique assignees, representing almost two-thirds of all non-individual, non-university, non-government assignees from 1975 to 1997. Using these new linked data, we generate a number of new descriptive statistics on the links between patenting and firm growth in the US manufacturing sector. We find that while there are significant cross-sectional differences in size and total factor productivity between patentee firms and non-patentee firms, changes in patent-ownership status within firms is associated with a contemporaneous and sizeable increase in firm size, but little to no change in total factor productivity. This evidence suggests that patenting is associated with firm growth through new product innovations that increase firm scope rather than through productivity-enhancing advances. Consistent with this explanation, we find that the change in patent-ownership status is contemporaneous with an increase in the number of unique seven-digit product classes that a firm produces. These findings are robust to alternative measures of size and productivity, and to various sample selection criteria.