Market Valuation of Corporate Technological Assets. The Case of Japan's Institutional Adaptability

Abstract

This presentation focuses on the market valuation of corporate technological assets in Japan. It contributes to the debate about the perceived legacy of institutions as profit-related pressures accumulate. Having analyzed the panel data-set consisting of 684 companies, each spanning over 19 years (from 1998 till 2016), this paper has found out that Japan’s “routinized” model is compatible with the marketability of its corporate innovations. Against the dominant role of research and development (R&D), especially for the drugs and chemicals, Tokyo Stock Exchange consistently rewards highly-cited patents filed by machinery and electric equipment companies. At the same time, with the exception of chemicals, higher R&D productivity measured as “patents per one yen spent on R&D” is not appreciated by investors. This suggests that higher patenting propensity alone is not a credible enough signal of corporate innovativeness. Another noteworthy finding is the U-shape relationship existing between firm’s age and Tobin’s q. This and other significant nonlinear patterns existing between explanatory and response variables are identified via the application of the Generalized Additive Models (GAMs) that helped to fine-tune the initial linear predictions.