The Value of Knowledge Spillovers

Author

Yi Deng

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2005-14 | June 1, 2005

This paper aims at quantifying the economic value of knowledge spillovers by exploring information contained in patent citations. We estimate a market valuation equation for semiconductor firms during the 1980s and 1990s, and find an average value in the amount of $0.6 to 1.2 million "R&D-equivalent" dollars for the knowledge spillovers as embodied in one patent citation. For an average semiconductor firm, such an estimate implies that the total value of knowledge spillovers the firm received during the sample period could be as high as half of its actual total R&D expenditures in the same period. This provides a direct measure of the economic values of the social returns or externalities of relevant technological innovations. We also find that the value of knowledge spillovers declines as the size of the firm’s patent portfolio increases, and that self citations are more valuable than external citations, indicating a significant amount of tacit knowledge or know-how spillovers that occur within the firm.

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