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  • P-ISSN 2586-2995
  • E-ISSN 2586-4130

KDI Journal of Economic Policy. Vol. 42, No. 3, August 2020, pp. 33-52

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Do Patents Lead to an Increase in Firm Value? Evidence from Korea


Author & Article History

Manuscript received 01 August 2020; revision received 06 August 2020; accepted 15 September 2020.


Patents are widely used in the literature as a measure of firm-level innovation. It is regarded that patents improve a firm’s operational environment and ultimately increase the value of the firm. However, the relationship between patents and firm value in Korea is under-explored in the literature due to the difficulty of constructing datasets. This paper examines whether patents in Korea increase the market value of a firm. To do this, I exploit novel data on firm-level patents and financial information of all listed Korean companies during the period of 1993- 2015 and estimate the non-linear production-function type of Tobin’s q equations on R&D, patents, and citations. Surprisingly, I find that patents and citations are weakly associated with firm value, while R&D is strongly associated with an increase in firm value. These results direct imply that policymakers in Korea should enhance patenting incentives to encourage firms to innovate.


Innovation, Firm Value, Tobin’s q, R&D, Patent

JEL Code

O30, O32, O34

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