Market Valuation of Corporate Technological Assets: The Case of Japan’s Institutional Adaptability

class: center, middle, inverse, title-slide

.title[
# Market Valuation of Corporate Technological Assets: <br> The Case of Japan’s Institutional Adaptability
]
.subtitle[
## 2021 SASE Conference: <br> .white.bg-black[Network F-KITE “Institutional Logics and Change”]
]
.author[
### Kostiantyn Ovsiannikov, Ph.D.
]
.institute[
### .white.bg-green[Kochi University of Technology]
]
.date[
### 2 July 2021
]

---

# Background: Japan's intrapreneurial regime

.pull-left-narrow[
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.pull-right-wide[### large companies <svg aria-hidden="true" role="img" viewBox="0 0 640 512" style="height:1em;width:1.25em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:blue;overflow:visible;position:relative;"><path d="M272.2 64.6l-51.1 51.1c-15.3 4.2-29.5 11.9-41.5 22.5L153 161.9C142.8 171 129.5 176 115.8 176H96V304c20.4 .6 39.8 8.9 54.3 23.4l35.6 35.6 7 7 0 0L219.9 397c6.2 6.2 16.4 6.2 22.6 0c1.7-1.7 3-3.7 3.7-5.8c2.8-7.7 9.3-13.5 17.3-15.3s16.4 .6 22.2 6.5L296.5 393c11.6 11.6 30.4 11.6 41.9 0c5.4-5.4 8.3-12.3 8.6-19.4c.4-8.8 5.6-16.6 13.6-20.4s17.3-3 24.4 2.1c9.4 6.7 22.5 5.8 30.9-2.6c9.4-9.4 9.4-24.6 0-33.9L340.1 243l-35.8 33c-27.3 25.2-69.2 25.6-97 .9c-31.7-28.2-32.4-77.4-1.6-106.5l70.1-66.2C303.2 78.4 339.4 64 377.1 64c36.1 0 71 13.3 97.9 37.2L505.1 128H544h40 40c8.8 0 16 7.2 16 16V352c0 17.7-14.3 32-32 32H576c-11.8 0-22.2-6.4-27.7-16H463.4c-3.4 6.7-7.9 13.1-13.5 18.7c-17.1 17.1-40.8 23.8-63 20.1c-3.6 7.3-8.5 14.1-14.6 20.2c-27.3 27.3-70 30-100.4 8.1c-25.1 20.8-62.5 19.5-86-4.1L159 404l-7-7-35.6-35.6c-5.5-5.5-12.7-8.7-20.4-9.3C96 369.7 81.6 384 64 384H32c-17.7 0-32-14.3-32-32V144c0-8.8 7.2-16 16-16H56 96h19.8c2 0 3.9-.7 5.3-2l26.5-23.6C175.5 77.7 211.4 64 248.7 64H259c4.4 0 8.9 .2 13.2 .6zM544 320V176H496c-5.9 0-11.6-2.2-15.9-6.1l-36.9-32.8c-18.2-16.2-41.7-25.1-66.1-25.1c-25.4 0-49.8 9.7-68.3 27.1l-70.1 66.2c-10.3 9.8-10.1 26.3 .5 35.7c9.3 8.3 23.4 8.1 32.5-.3l71.9-66.4c9.7-9 24.9-8.4 33.9 1.4s8.4 24.9-1.4 33.9l-.8 .8 74.4 74.4c10 10 16.5 22.3 19.4 35.1H544zM64 336a16 16 0 1 0 -32 0 16 16 0 1 0 32 0zm528 16a16 16 0 1 0 0-32 16 16 0 1 0 0 32z"/></svg> financial institutions]

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.center[### <svg aria-hidden="true" role="img" viewBox="0 0 512 512" style="height:1em;width:1em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:green;overflow:visible;position:relative;"><path d="M383.5 192c.3-5.3 .5-10.6 .5-16c0-51-15.9-96-40.2-127.6C319.5 16.9 288.2 0 256 0s-63.5 16.9-87.8 48.4C143.9 80 128 125 128 176c0 5.4 .2 10.7 .5 16H240V320H208c-7 0-13.7 1.5-19.7 4.2L68.2 192H96.5c-.3-5.3-.5-10.6-.5-16c0-64 22.2-121.2 57.1-159.3C62 49.3 18.6 122.6 4.2 173.6C1.5 183.1 9 192 18.9 192h6L165.2 346.3c-3.3 6.5-5.2 13.9-5.2 21.7v96c0 26.5 21.5 48 48 48h96c26.5 0 48-21.5 48-48V368c0-7.8-1.9-15.2-5.2-21.7L487.1 192h6c9.9 0 17.4-8.9 14.7-18.4C493.4 122.6 450 49.3 358.9 16.7C393.8 54.8 416 112.1 416 176c0 5.4-.2 10.7-.5 16h28.3L323.7 324.2c-6-2.7-12.7-4.2-19.7-4.2H272V192H383.5z"/></svg>]]
.pull-right-wide[### .white.bg-black[low employment turnover rates] <svg aria-hidden="true" role="img" viewBox="0 0 512 512" style="height:1em;width:1em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:blue;overflow:visible;position:relative;"><path d="M504.3 273.6c4.9-4.5 7.7-10.9 7.7-17.6s-2.8-13-7.7-17.6l-112-104c-7-6.5-17.2-8.2-25.9-4.4s-14.4 12.5-14.4 22l0 56-192 0 0-56c0-9.5-5.7-18.2-14.4-22s-18.9-2.1-25.9 4.4l-112 104C2.8 243 0 249.3 0 256s2.8 13 7.7 17.6l112 104c7 6.5 17.2 8.2 25.9 4.4s14.4-12.5 14.4-22l0-56 192 0 0 56c0 9.5 5.7 18.2 14.4 22s18.9 2.1 25.9-4.4l112-104z"/></svg> employees' loyalty]

.pull-left-narrow[
.center[### <svg aria-hidden="true" role="img" viewBox="0 0 448 512" style="height:1em;width:0.88em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:green;overflow:visible;position:relative;"><path d="M370.7 96.1C346.1 39.5 289.7 0 224 0S101.9 39.5 77.3 96.1C60.9 97.5 48 111.2 48 128v64c0 16.8 12.9 30.5 29.3 31.9C101.9 280.5 158.3 320 224 320s122.1-39.5 146.7-96.1c16.4-1.4 29.3-15.1 29.3-31.9V128c0-16.8-12.9-30.5-29.3-31.9zM336 144v16c0 53-43 96-96 96H208c-53 0-96-43-96-96V144c0-26.5 21.5-48 48-48H288c26.5 0 48 21.5 48 48zM189.3 162.7l-6-21.2c-.9-3.3-3.9-5.5-7.3-5.5s-6.4 2.2-7.3 5.5l-6 21.2-21.2 6c-3.3 .9-5.5 3.9-5.5 7.3s2.2 6.4 5.5 7.3l21.2 6 6 21.2c.9 3.3 3.9 5.5 7.3 5.5s6.4-2.2 7.3-5.5l6-21.2 21.2-6c3.3-.9 5.5-3.9 5.5-7.3s-2.2-6.4-5.5-7.3l-21.2-6zM112.7 316.5C46.7 342.6 0 407 0 482.3C0 498.7 13.3 512 29.7 512H128V448c0-17.7 14.3-32 32-32H288c17.7 0 32 14.3 32 32v64l98.3 0c16.4 0 29.7-13.3 29.7-29.7c0-75.3-46.7-139.7-112.7-165.8C303.9 338.8 265.5 352 224 352s-79.9-13.2-111.3-35.5zM176 448c-8.8 0-16 7.2-16 16v48h32V464c0-8.8-7.2-16-16-16zm96 32a16 16 0 1 0 0-32 16 16 0 1 0 0 32z"/></svg>]]
.pull-right-wide[### <span><i class="fas  fa-lightbulb faa-pulse animated faa-slow " style=" color:blue;"></i></span> .white.bg-black[routinized innovation model] <svg aria-hidden="true" role="img" viewBox="0 0 512 512" style="height:1em;width:1em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:blue;overflow:visible;position:relative;"><path d="M504.3 273.6c4.9-4.5 7.7-10.9 7.7-17.6s-2.8-13-7.7-17.6l-112-104c-7-6.5-17.2-8.2-25.9-4.4s-14.4 12.5-14.4 22l0 56-192 0 0-56c0-9.5-5.7-18.2-14.4-22s-18.9-2.1-25.9 4.4l-112 104C2.8 243 0 249.3 0 256s2.8 13 7.7 17.6l112 104c7 6.5 17.2 8.2 25.9 4.4s14.4-12.5 14.4-22l0-56 192 0 0 56c0 9.5 5.7 18.2 14.4 22s18.9 2.1 25.9-4.4l112-104z"/></svg> well-established R&D departments]

---
class: highlight-last-item

# Why current research matters

- Japan has the .white.bg-black[3rd-largest] market capitalization for listed companies in the <svg aria-hidden="true" role="img" viewBox="0 0 512 512" style="height:1em;width:1em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:blue;overflow:visible;position:relative;"><path d="M51.7 295.1l31.7 6.3c7.9 1.6 16-.9 21.7-6.6l15.4-15.4c11.6-11.6 31.1-8.4 38.4 6.2l9.3 18.5c4.8 9.6 14.6 15.7 25.4 15.7c15.2 0 26.1-14.6 21.7-29.2l-6-19.9c-4.6-15.4 6.9-30.9 23-30.9h2.3c13.4 0 25.9-6.7 33.3-17.8l10.7-16.1c5.6-8.5 5.3-19.6-.8-27.7l-16.1-21.5c-10.3-13.7-3.3-33.5 13.4-37.7l17-4.3c7.5-1.9 13.6-7.2 16.5-14.4l16.4-40.9C303.4 52.1 280.2 48 256 48C141.1 48 48 141.1 48 256c0 13.4 1.3 26.5 3.7 39.1zm407.7 4.6c-3-.3-6-.1-9 .8l-15.8 4.4c-6.7 1.9-13.8-.9-17.5-6.7l-2-3.1c-6-9.4-16.4-15.1-27.6-15.1s-21.6 5.7-27.6 15.1l-6.1 9.5c-1.4 2.2-3.4 4.1-5.7 5.3L312 330.1c-18.1 10.1-25.5 32.4-17 51.3l5.5 12.4c8.6 19.2 30.7 28.5 50.5 21.1l2.6-1c10-3.7 21.3-2.2 29.9 4.1l1.5 1.1c37.2-29.5 64.1-71.4 74.4-119.5zM0 256a256 256 0 1 1 512 0A256 256 0 1 1 0 256zm144.5 92.1c-2.1 8.6 3.1 17.3 11.6 19.4l32 8c8.6 2.1 17.3-3.1 19.4-11.6s-3.1-17.3-11.6-19.4l-32-8c-8.6-2.1-17.3 3.1-19.4 11.6zm92-20c-2.1 8.6 3.1 17.3 11.6 19.4s17.3-3.1 19.4-11.6l8-32c2.1-8.6-3.1-17.3-11.6-19.4s-17.3 3.1-19.4 11.6l-8 32zM343.2 113.7c-7.9-4-17.5-.7-21.5 7.2l-16 32c-4 7.9-.7 17.5 7.2 21.5s17.5 .7 21.5-7.2l16-32c4-7.9 .7-17.5-7.2-21.5z"/></svg>

- both patenting quality and quantity are among the highest in the <svg aria-hidden="true" role="img" viewBox="0 0 512 512" style="height:1em;width:1em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:blue;overflow:visible;position:relative;"><path d="M51.7 295.1l31.7 6.3c7.9 1.6 16-.9 21.7-6.6l15.4-15.4c11.6-11.6 31.1-8.4 38.4 6.2l9.3 18.5c4.8 9.6 14.6 15.7 25.4 15.7c15.2 0 26.1-14.6 21.7-29.2l-6-19.9c-4.6-15.4 6.9-30.9 23-30.9h2.3c13.4 0 25.9-6.7 33.3-17.8l10.7-16.1c5.6-8.5 5.3-19.6-.8-27.7l-16.1-21.5c-10.3-13.7-3.3-33.5 13.4-37.7l17-4.3c7.5-1.9 13.6-7.2 16.5-14.4l16.4-40.9C303.4 52.1 280.2 48 256 48C141.1 48 48 141.1 48 256c0 13.4 1.3 26.5 3.7 39.1zm407.7 4.6c-3-.3-6-.1-9 .8l-15.8 4.4c-6.7 1.9-13.8-.9-17.5-6.7l-2-3.1c-6-9.4-16.4-15.1-27.6-15.1s-21.6 5.7-27.6 15.1l-6.1 9.5c-1.4 2.2-3.4 4.1-5.7 5.3L312 330.1c-18.1 10.1-25.5 32.4-17 51.3l5.5 12.4c8.6 19.2 30.7 28.5 50.5 21.1l2.6-1c10-3.7 21.3-2.2 29.9 4.1l1.5 1.1c37.2-29.5 64.1-71.4 74.4-119.5zM0 256a256 256 0 1 1 512 0A256 256 0 1 1 0 256zm144.5 92.1c-2.1 8.6 3.1 17.3 11.6 19.4l32 8c8.6 2.1 17.3-3.1 19.4-11.6s-3.1-17.3-11.6-19.4l-32-8c-8.6-2.1-17.3 3.1-19.4 11.6zm92-20c-2.1 8.6 3.1 17.3 11.6 19.4s17.3-3.1 19.4-11.6l8-32c2.1-8.6-3.1-17.3-11.6-19.4s-17.3 3.1-19.4 11.6l-8 32zM343.2 113.7c-7.9-4-17.5-.7-21.5 7.2l-16 32c-4 7.9-.7 17.5 7.2 21.5s17.5 .7 21.5-7.2l16-32c4-7.9 .7-17.5-7.2-21.5z"/></svg>

- distinct corporate institutional arrangements (.white.bg-black[relational finance] & .white.bg-black[stakeholder governance]) <svg aria-hidden="true" role="img" viewBox="0 0 448 512" style="height:1em;width:0.88em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:blue;overflow:visible;position:relative;"><path d="M438.6 278.6c12.5-12.5 12.5-32.8 0-45.3l-160-160c-12.5-12.5-32.8-12.5-45.3 0s-12.5 32.8 0 45.3L338.8 224 32 224c-17.7 0-32 14.3-32 32s14.3 32 32 32l306.7 0L233.4 393.4c-12.5 12.5-12.5 32.8 0 45.3s32.8 12.5 45.3 0l160-160z"/></svg>

<br>

<ru-blockquote>Organizations are social communities in which individual and social expertise is transformed into economically useful products and services
.right[— <cite>Kogut and Zander (1992)</cite>]</ru-blockquote>

<br>

- .white.bg-black[However], during the last 30 years, Japan has witnessed **institutional** <svg aria-hidden="true" role="img" viewBox="0 0 512 512" style="height:1em;width:1em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:blue;overflow:visible;position:relative;"><path d="M403.8 34.4c12-5 25.7-2.2 34.9 6.9l64 64c6 6 9.4 14.1 9.4 22.6s-3.4 16.6-9.4 22.6l-64 64c-9.2 9.2-22.9 11.9-34.9 6.9s-19.8-16.6-19.8-29.6V160H352c-10.1 0-19.6 4.7-25.6 12.8L284 229.3 244 176l31.2-41.6C293.3 110.2 321.8 96 352 96h32V64c0-12.9 7.8-24.6 19.8-29.6zM164 282.7L204 336l-31.2 41.6C154.7 401.8 126.2 416 96 416H32c-17.7 0-32-14.3-32-32s14.3-32 32-32H96c10.1 0 19.6-4.7 25.6-12.8L164 282.7zm274.6 188c-9.2 9.2-22.9 11.9-34.9 6.9s-19.8-16.6-19.8-29.6V416H352c-30.2 0-58.7-14.2-76.8-38.4L121.6 172.8c-6-8.1-15.5-12.8-25.6-12.8H32c-17.7 0-32-14.3-32-32s14.3-32 32-32H96c30.2 0 58.7 14.2 76.8 38.4L326.4 339.2c6 8.1 15.5 12.8 25.6 12.8h32V320c0-12.9 7.8-24.6 19.8-29.6s25.7-2.2 34.9 6.9l64 64c6 6 9.4 14.1 9.4 22.6s-3.4 16.6-9.4 22.6l-64 64z"/></svg> , as **market influence** has <svg aria-hidden="true" role="img" viewBox="0 0 384 512" style="height:1em;width:0.75em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:blue;overflow:visible;position:relative;"><path d="M214.6 41.4c-12.5-12.5-32.8-12.5-45.3 0l-160 160c-12.5 12.5-12.5 32.8 0 45.3s32.8 12.5 45.3 0L160 141.2V448c0 17.7 14.3 32 32 32s32-14.3 32-32V141.2L329.4 246.6c12.5 12.5 32.8 12.5 45.3 0s12.5-32.8 0-45.3l-160-160z"/></svg>

???

* legislation promoting market competition has been toughened -- 2005 amendment of Japan's Anti-Monopoly Act

* entry barriers lowered for pharmaceuticals during the late-1990s, which paved a path to a more intensive industrial competition

* similar processes have been observed in Japan's electric sector since mid-1990s, leading to a higher R&D efficiency as well as more intensive patenting

* these developments invited further attention to changing market perceptions of corporate innovations amid the ongoing balance shift from the institutional towards a more market-based industrial model

---

# RQ & Hypotheses

.black.bg-washed-green.b--dark-green.ba.bw2.br3.shadow-5.ph4.mt5[
How does Tokyo Stock Exchange (TSE) evaluate corporate innovations?]

--
> **Hypothesis 1**
>
TSE positively evaluates companies with higher R&D expenditures.
This represents the .white.bg-black[institutional] aspect of corporate innovations.

???

* R&D stock is a long-term institutional signaling; attribute of a **network-based** business approach that works in the regulated and coordinated environment

> **Hypothesis 2**
>
TSE positively evaluates companies whose R&D expenditures yield higher patent stocks.
This represents the .white.bg-black[quantitative-market] aspect of corporate innovative policies.

???

- Patents' quantity and quality are preconditions for successfully waging market **competition**. Here, not only the mere R&D spending, but rather **R&D efficiency** matters

> **Hypothesis 3**
>
TSE positively evaluates influential patents judged by the number of citations accruing to them.
This represents the .white.bg-black[qualitative-market] aspect of innovative policies.

---

# Data

.panelset.sideways[
.panel[.panel-name[Size]

- 684 companies <svg aria-hidden="true" role="img" viewBox="0 0 384 512" style="height:1em;width:0.75em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:blue;overflow:visible;position:relative;"><path d="M342.6 150.6c12.5-12.5 12.5-32.8 0-45.3s-32.8-12.5-45.3 0L192 210.7 86.6 105.4c-12.5-12.5-32.8-12.5-45.3 0s-12.5 32.8 0 45.3L146.7 256 41.4 361.4c-12.5 12.5-12.5 32.8 0 45.3s32.8 12.5 45.3 0L192 301.3 297.4 406.6c12.5 12.5 32.8 12.5 45.3 0s12.5-32.8 0-45.3L237.3 256 342.6 150.6z"/></svg> 19 years (1998 — 2016) <svg aria-hidden="true" role="img" viewBox="0 0 448 512" style="height:1em;width:0.88em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:blue;overflow:visible;position:relative;"><path d="M438.6 278.6c12.5-12.5 12.5-32.8 0-45.3l-160-160c-12.5-12.5-32.8-12.5-45.3 0s-12.5 32.8 0 45.3L338.8 224 32 224c-17.7 0-32 14.3-32 32s14.3 32 32 32l306.7 0L233.4 393.4c-12.5 12.5-12.5 32.8 0 45.3s32.8 12.5 45.3 0l160-160z"/></svg>

- 12,996 observations <svg aria-hidden="true" role="img" viewBox="0 0 448 512" style="height:1em;width:0.88em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:blue;overflow:visible;position:relative;"><path d="M432 256c0 17.7-14.3 32-32 32L48 288c-17.7 0-32-14.3-32-32s14.3-32 32-32l352 0c17.7 0 32 14.3 32 32z"/></svg> outliers <svg aria-hidden="true" role="img" viewBox="0 0 448 512" style="height:1em;width:0.88em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:blue;overflow:visible;position:relative;"><path d="M48 128c-17.7 0-32 14.3-32 32s14.3 32 32 32H400c17.7 0 32-14.3 32-32s-14.3-32-32-32H48zm0 192c-17.7 0-32 14.3-32 32s14.3 32 32 32H400c17.7 0 32-14.3 32-32s-14.3-32-32-32H48z"/></svg> 8,038 observations. 
]

.panel[.panel-name[Sources]

- .white.bg-black[Nikkei NEEDS Financial Quest]

- .white.bg-black[Institute of Intellectual Property Patent Database] (IIP-DB) (Goto and Motohashi, 2007)

]

.panel[.panel-name[Industries]

## <svg aria-hidden="true" role="img" viewBox="0 0 576 512" style="height:1em;width:1.12em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:green;overflow:visible;position:relative;"><path d="M64 144c0-26.5 21.5-48 48-48s48 21.5 48 48V256H64V144zM0 144V368c0 61.9 50.1 112 112 112s112-50.1 112-112V189.6c1.8 19.1 8.2 38 19.8 54.8L372.3 431.7c35.5 51.7 105.3 64.3 156 28.1s63-107.5 27.5-159.2L427.3 113.3C391.8 61.5 321.9 49 271.3 85.2c-28 20-44.3 50.8-47.3 83V144c0-61.9-50.1-112-112-112S0 82.1 0 144zm296.6 64.2c-16-23.3-10-55.3 11.9-71c21.2-15.1 50.5-10.3 66 12.2l67 97.6L361.6 303l-65-94.8zM491 407.7c-.8 .6-1.6 1.1-2.4 1.6l4-2.8c-.5 .4-1 .8-1.6 1.2z"/></svg> &nbsp;&nbsp;&nbsp; Pharmaceutical

## <svg aria-hidden="true" role="img" viewBox="0 0 448 512" style="height:1em;width:0.88em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:green;overflow:visible;position:relative;"><path d="M160 208.5c0 29.1-15.6 53.9-37.2 67.8c-17.2 11.1-31.5 26.1-41.7 43.7H302.9c-10.2-17.6-24.5-32.6-41.7-43.7c-21.6-13.9-37.2-38.7-37.2-67.8V64H160V208.5zM288 64V208.5c0 5.7 3.1 10.9 7.9 14c11.2 7.2 21.5 15.5 30.9 24.8L366.1 208l-7-7c-9.4-9.4-9.4-24.6 0-33.9s24.6-9.4 33.9 0l24 24 24 24c9.4 9.4 9.4 24.6 0 33.9s-24.6 9.4-33.9 0l-7-7-43.3 43.3C374 314.1 384 347.9 384 384c0 39.4-11.9 76.1-32.2 106.5c-9.6 14.4-26.5 21.5-43.8 21.5H76.1c-17.3 0-34.2-7.1-43.8-21.5C11.9 460.1 0 423.4 0 384c0-67.8 35.1-127.3 88.1-161.5c4.8-3.1 7.9-8.3 7.9-14V64C78.3 64 64 49.7 64 32S78.3 0 96 0h16H272h16c17.7 0 32 14.3 32 32s-14.3 32-32 32z"/></svg> &nbsp;&nbsp;&nbsp;&nbsp; Chemical

## <svg aria-hidden="true" role="img" viewBox="0 0 640 512" style="height:1em;width:1.25em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:green;overflow:visible;position:relative;"><path d="M160 24c0-13.3 10.7-24 24-24H296c13.3 0 24 10.7 24 24s-10.7 24-24 24H280L384 192H500.4c7.7 0 15.3 1.4 22.5 4.1L625 234.4c9 3.4 15 12 15 21.6s-6 18.2-15 21.6L522.9 315.9c-7.2 2.7-14.8 4.1-22.5 4.1H384L280 464h16c13.3 0 24 10.7 24 24s-10.7 24-24 24H184c-13.3 0-24-10.7-24-24s10.7-24 24-24h8V320H160l-54.6 54.6c-6 6-14.1 9.4-22.6 9.4H64c-17.7 0-32-14.3-32-32V288c-17.7 0-32-14.3-32-32s14.3-32 32-32V160c0-17.7 14.3-32 32-32H82.7c8.5 0 16.6 3.4 22.6 9.4L160 192h32V48h-8c-13.3 0-24-10.7-24-24zM80 240c-8.8 0-16 7.2-16 16s7.2 16 16 16h64c8.8 0 16-7.2 16-16s-7.2-16-16-16H80z"/></svg> &nbsp;&nbsp; Machinery

## <svg aria-hidden="true" role="img" viewBox="0 0 576 512" style="height:1em;width:1.12em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:green;overflow:visible;position:relative;"><path d="M96 0C60.7 0 32 28.7 32 64V448c-17.7 0-32 14.3-32 32s14.3 32 32 32H320c17.7 0 32-14.3 32-32s-14.3-32-32-32V304h16c22.1 0 40 17.9 40 40v32c0 39.8 32.2 72 72 72s72-32.2 72-72V252.3c32.5-10.2 56-40.5 56-76.3V144c0-8.8-7.2-16-16-16H544V80c0-8.8-7.2-16-16-16s-16 7.2-16 16v48H480V80c0-8.8-7.2-16-16-16s-16 7.2-16 16v48H432c-8.8 0-16 7.2-16 16v32c0 35.8 23.5 66.1 56 76.3V376c0 13.3-10.7 24-24 24s-24-10.7-24-24V344c0-48.6-39.4-88-88-88H320V64c0-35.3-28.7-64-64-64H96zM216.9 82.7c6 4 8.5 11.5 6.3 18.3l-25 74.9H256c6.7 0 12.7 4.2 15 10.4s.5 13.3-4.6 17.7l-112 96c-5.5 4.7-13.4 5.1-19.3 1.1s-8.5-11.5-6.3-18.3l25-74.9H96c-6.7 0-12.7-4.2-15-10.4s-.5-13.3 4.6-17.7l112-96c5.5-4.7 13.4-5.1 19.3-1.1z"/></svg> &nbsp;&nbsp;&nbsp; Electrical Equipment

]

---

# Timing of patent grants

.panelset[

.panel[.panel-name[Plot]

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.panel[.panel-name[Table]

<div id="htmlwidget-b53e9dc733f0124b4eb2" style="width:80%;height:auto;" class="datatables html-widget "></div>
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</div>
]
]

???

# Plot

1. In 1994, the pre-grant opposition system was replaced for the post-grant one, thereby eliminating potential procedural delays.

2. In 1998, the punishments for the copy-rights infringements were severed.
Due to this, patentees had more solid reasons to seek for the legal protection of their inventions.

3. In 1999, the period for the compulsory request for patent examination was decreased from 7 to 3 years from the date of application.
Thereby, many applicants were prompted to speed up the registration of their inventions.

# Table

* Application-filing process is especially time-consuming for the **Pharmaceutical** industry, where the average period for granting a patent is 7.1 years -- well above the cumulative mean of 6.45 years.

* Although an average time for receiving a patent within the **Chemical** industry throughout 1971-2014 was roughly the same as within the Electronics, starting from 1990s Chemical-related applications have required more approval time than the Electric-related ones.

---

# Patents-to-applications ratio

.panelset[
.panel[.panel-name[Plot]

]

.panel[.panel-name[Table]

<div id="htmlwidget-ee40ca358a0a3e2e6e6a" style="width:80%;height:auto;" class="datatables html-widget "></div>
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</div>
]
]

???

# Plot

* Median granting success rate of patents filed with the Japan Patent Office (JPO) from 1971 to 2014 was 37 percent. 
Very similar to the 35 percent in Germany and is considerably lower compared to countries such as France (90 percent) and the U.K. (80 percent) [griliches1998, p. 289].

* Although the granting rate has been on a sharp rise in Japan since early 2000s, it is still indicative of a stringent control mechanism that the local application process entails.

# Table

* comparatively high industrial success rates for **Pharmaceuticals** (50 percent) and **Chemicals** (48 percent) are a cause of patents being particularly important for realizing the gains from intangible assets.

* "In the **pharmaceutical** industry, patents are perceived as a relatively effective tool of appropriating rents from technological innovations as compared to other types of mechanism such as trade secret, increasing complexity of product design and faster market introduction" [Motohashi.2008, p. 1548].

---

#Methodology

- Market value of the firm, **V**, can be expressed as follows (Griliches, 1981):

`$$V_{it} = \alpha(A_{it} + \beta K_{it})$$`

> where **A** — firm's tangible assets, **K** — knowledge stock, and `$\alpha$` — market valuation of the firm’s assets

--
<br>

- **Tobin's q** = .white.bg-black[market value] **V** / .white.bg-black[book value] **A** <svg aria-hidden="true" role="img" viewBox="0 0 448 512" style="height:1em;width:0.88em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:blue;overflow:visible;position:relative;"><path d="M438.6 278.6c12.5-12.5 12.5-32.8 0-45.3l-160-160c-12.5-12.5-32.8-12.5-45.3 0s-12.5 32.8 0 45.3L338.8 224 32 224c-17.7 0-32 14.3-32 32s14.3 32 32 32l306.7 0L233.4 393.4c-12.5 12.5-12.5 32.8 0 45.3s32.8 12.5 45.3 0l160-160z"/></svg>

`$$q_t = \frac {V_{it}} {A_{it}} = \alpha \biggl(1 + \beta \frac {K_{it}} {A_{it}}\biggr) + \varepsilon_{it}$$`

- Knowledge stock **K**: .white.bg-black[R&D / Tangible Assets], .white.bg-black[Patents per Japanese yen spent on R&D], .white.bg-black[Citations per Patent] (Hall, Jaffe, and Trajtenberg, 2005) <svg aria-hidden="true" role="img" viewBox="0 0 448 512" style="height:1em;width:0.88em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:blue;overflow:visible;position:relative;"><path d="M438.6 278.6c12.5-12.5 12.5-32.8 0-45.3l-160-160c-12.5-12.5-32.8-12.5-45.3 0s-12.5 32.8 0 45.3L338.8 224 32 224c-17.7 0-32 14.3-32 32s14.3 32 32 32l306.7 0L233.4 393.4c-12.5 12.5-12.5 32.8 0 45.3s32.8 12.5 45.3 0l160-160z"/></svg>

`$$\log q_{it} = \log \alpha_t + \log \biggl(1 + \beta_1 \frac {R\&D_{it}} {A_{it}} + \beta_2 \frac {Pat_{it}} {R\&D_{it}} + \beta_3 \frac {Cites_{it}} {Pat_{it}}\biggr) + \varepsilon_{it}$$`
???

To sum up, **Tobins's Q** can be expressed as the sum of knowledge stocks weighted by tangible assets.

---

# OLS regression

<table class="table table table-striped table-hover table-condensed" style="width: auto !important; margin-left: auto; margin-right: auto; font-size: 15px; margin-left: auto; margin-right: auto;">
 <thead>
  <tr>
   <th style="text-align:left;color: white !important;background-color: black !important;">   </th>
   <th style="text-align:center;color: white !important;background-color: black !important;"> OLS </th>
   <th style="text-align:center;color: white !important;background-color: black !important;">  OLS (Industrial) </th>
  </tr>
 </thead>
<tbody>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Constant </td>
   <td style="text-align:center;"> −0.316 (0.055)*** </td>
   <td style="text-align:center;"> −0.407 (0.068)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> D (Electric) </td>
   <td style="text-align:center;"> 0.069 (0.015)*** </td>
   <td style="text-align:center;"> 0.068 (0.076) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> D (Machinery) </td>
   <td style="text-align:center;"> 0.012 (0.029) </td>
   <td style="text-align:center;"> 0.255 (0.069)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> D (Pharm) </td>
   <td style="text-align:center;"> 0.356 (0.025)*** </td>
   <td style="text-align:center;"> 0.268 (0.132)* </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;"> R&amp;D/Assets (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.019 (0.066) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.608 (0.096)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> R&amp;D/Assets x Electric </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.288 (0.093)** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> R&amp;D/Assets x Machinery </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.611 (0.178)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> R&amp;D/Assets x Pharm </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.537 (0.204)** </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;"> Patents/R&amp;D (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.024 (0.081) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 1.018 (0.156)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Electric </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.916 (0.207)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Machinery </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −2.640 (0.251)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Pharm </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.729 (0.520) </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;"> Citations/Patents (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.058 (0.013)*** </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> −0.014 (0.018) </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Citations/Patents x Electric </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.187 (0.026)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Citations/Patents x Machinery </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.103 (0.026)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Citations/Patents x Pharm </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.033 (0.037) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> R&amp;D Intensity </td>
   <td style="text-align:center;"> 0.738 (0.118)*** </td>
   <td style="text-align:center;"> 0.044 (0.130) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Process Innovation </td>
   <td style="text-align:center;"> 0.033 (0.011)** </td>
   <td style="text-align:center;"> 0.032 (0.011)** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Leverage </td>
   <td style="text-align:center;"> 1.287 (0.038)*** </td>
   <td style="text-align:center;"> 1.086 (0.042)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> ROA </td>
   <td style="text-align:center;"> 2.716 (0.106)*** </td>
   <td style="text-align:center;"> 2.656 (0.106)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Capital Intensity </td>
   <td style="text-align:center;"> 0.038 (0.005)*** </td>
   <td style="text-align:center;"> 0.045 (0.005)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;box-shadow: 0px 1.5pxfont-weight: bold;"> Age </td>
   <td style="text-align:center;box-shadow: 0px 1.5px"> −0.001 (0.000)*** </td>
   <td style="text-align:center;box-shadow: 0px 1.5px"> −0.001 (0.000)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: blue !important;font-weight: bold;"> Num.Obs. </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 6903 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 6903 </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: blue !important;font-weight: bold;"> R2 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 0.292 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 0.310 </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> RMSE </td>
   <td style="text-align:center;"> 0.41 </td>
   <td style="text-align:center;"> 0.40 </td>
  </tr>
</tbody>
</table>

---
count: false

# OLS regression

<table class="table table table-striped table-hover table-condensed" style="width: auto !important; margin-left: auto; margin-right: auto; font-size: 15px; margin-left: auto; margin-right: auto;">
 <thead>
  <tr>
   <th style="text-align:left;color: white !important;background-color: black !important;">   </th>
   <th style="text-align:center;color: white !important;background-color: black !important;"> OLS </th>
   <th style="text-align:center;color: white !important;background-color: black !important;">  OLS (Industrial) </th>
  </tr>
 </thead>
<tbody>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Constant </td>
   <td style="text-align:center;"> −0.316 (0.055)*** </td>
   <td style="text-align:center;"> −0.407 (0.068)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> D (Electric) </td>
   <td style="text-align:center;"> 0.069 (0.015)*** </td>
   <td style="text-align:center;"> 0.068 (0.076) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> D (Machinery) </td>
   <td style="text-align:center;"> 0.012 (0.029) </td>
   <td style="text-align:center;"> 0.255 (0.069)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;background-color: green !important;"> D (Pharm) </td>
   <td style="text-align:center;background-color: green !important;"> 0.356 (0.025)*** </td>
   <td style="text-align:center;background-color: green !important;"> 0.268 (0.132)* </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;"> R&amp;D/Assets (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.019 (0.066) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.608 (0.096)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> R&amp;D/Assets x Electric </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.288 (0.093)** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> R&amp;D/Assets x Machinery </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.611 (0.178)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> R&amp;D/Assets x Pharm </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.537 (0.204)** </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;"> Patents/R&amp;D (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.024 (0.081) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 1.018 (0.156)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Electric </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.916 (0.207)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Machinery </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −2.640 (0.251)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Pharm </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.729 (0.520) </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;"> Citations/Patents (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.058 (0.013)*** </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> −0.014 (0.018) </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Citations/Patents x Electric </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.187 (0.026)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Citations/Patents x Machinery </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.103 (0.026)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Citations/Patents x Pharm </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.033 (0.037) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> R&amp;D Intensity </td>
   <td style="text-align:center;"> 0.738 (0.118)*** </td>
   <td style="text-align:center;"> 0.044 (0.130) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Process Innovation </td>
   <td style="text-align:center;"> 0.033 (0.011)** </td>
   <td style="text-align:center;"> 0.032 (0.011)** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Leverage </td>
   <td style="text-align:center;"> 1.287 (0.038)*** </td>
   <td style="text-align:center;"> 1.086 (0.042)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> ROA </td>
   <td style="text-align:center;"> 2.716 (0.106)*** </td>
   <td style="text-align:center;"> 2.656 (0.106)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Capital Intensity </td>
   <td style="text-align:center;"> 0.038 (0.005)*** </td>
   <td style="text-align:center;"> 0.045 (0.005)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;box-shadow: 0px 1.5pxfont-weight: bold;"> Age </td>
   <td style="text-align:center;box-shadow: 0px 1.5px"> −0.001 (0.000)*** </td>
   <td style="text-align:center;box-shadow: 0px 1.5px"> −0.001 (0.000)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: blue !important;font-weight: bold;"> Num.Obs. </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 6903 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 6903 </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: blue !important;font-weight: bold;"> R2 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 0.292 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 0.310 </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> RMSE </td>
   <td style="text-align:center;"> 0.41 </td>
   <td style="text-align:center;"> 0.40 </td>
  </tr>
</tbody>
</table>

???

# Industrial premium

* Belonging to **Pharmaceuticals** per se implies a premium in terms of market valuation of corporate knowledge assets.

---
count: false

# OLS regression

<table class="table table table-striped table-hover table-condensed" style="width: auto !important; margin-left: auto; margin-right: auto; font-size: 15px; margin-left: auto; margin-right: auto;">
 <thead>
  <tr>
   <th style="text-align:left;color: white !important;background-color: black !important;">   </th>
   <th style="text-align:center;color: white !important;background-color: black !important;"> OLS </th>
   <th style="text-align:center;color: white !important;background-color: black !important;">  OLS (Industrial) </th>
  </tr>
 </thead>
<tbody>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Constant </td>
   <td style="text-align:center;"> −0.316 (0.055)*** </td>
   <td style="text-align:center;"> −0.407 (0.068)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> D (Electric) </td>
   <td style="text-align:center;"> 0.069 (0.015)*** </td>
   <td style="text-align:center;"> 0.068 (0.076) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> D (Machinery) </td>
   <td style="text-align:center;"> 0.012 (0.029) </td>
   <td style="text-align:center;"> 0.255 (0.069)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> D (Pharm) </td>
   <td style="text-align:center;"> 0.356 (0.025)*** </td>
   <td style="text-align:center;"> 0.268 (0.132)* </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;background-color: green !important;"> R&amp;D/Assets (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;background-color: green !important;"> 0.019 (0.066) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;background-color: green !important;"> 0.608 (0.096)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> R&amp;D/Assets x Electric </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.288 (0.093)** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;background-color: green !important;" indentlevel="1"> R&amp;D/Assets x Machinery </td>
   <td style="text-align:center;background-color: green !important;">  </td>
   <td style="text-align:center;background-color: green !important;"> 0.611 (0.178)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;background-color: green !important;" indentlevel="1"> R&amp;D/Assets x Pharm </td>
   <td style="text-align:center;background-color: green !important;">  </td>
   <td style="text-align:center;background-color: green !important;"> 0.537 (0.204)** </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;"> Patents/R&amp;D (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.024 (0.081) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 1.018 (0.156)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Electric </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.916 (0.207)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Machinery </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −2.640 (0.251)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Pharm </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.729 (0.520) </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;"> Citations/Patents (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.058 (0.013)*** </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> −0.014 (0.018) </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Citations/Patents x Electric </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.187 (0.026)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Citations/Patents x Machinery </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.103 (0.026)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Citations/Patents x Pharm </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.033 (0.037) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> R&amp;D Intensity </td>
   <td style="text-align:center;"> 0.738 (0.118)*** </td>
   <td style="text-align:center;"> 0.044 (0.130) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Process Innovation </td>
   <td style="text-align:center;"> 0.033 (0.011)** </td>
   <td style="text-align:center;"> 0.032 (0.011)** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Leverage </td>
   <td style="text-align:center;"> 1.287 (0.038)*** </td>
   <td style="text-align:center;"> 1.086 (0.042)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> ROA </td>
   <td style="text-align:center;"> 2.716 (0.106)*** </td>
   <td style="text-align:center;"> 2.656 (0.106)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Capital Intensity </td>
   <td style="text-align:center;"> 0.038 (0.005)*** </td>
   <td style="text-align:center;"> 0.045 (0.005)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;box-shadow: 0px 1.5pxfont-weight: bold;"> Age </td>
   <td style="text-align:center;box-shadow: 0px 1.5px"> −0.001 (0.000)*** </td>
   <td style="text-align:center;box-shadow: 0px 1.5px"> −0.001 (0.000)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: blue !important;font-weight: bold;"> Num.Obs. </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 6903 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 6903 </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: blue !important;font-weight: bold;"> R2 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 0.292 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 0.310 </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> RMSE </td>
   <td style="text-align:center;"> 0.41 </td>
   <td style="text-align:center;"> 0.40 </td>
  </tr>
</tbody>
</table>

???

# R&D stock

* **Drugs** are notable for the marketability of their R&D expenditures (R&D stock weighted by Assets).

* The same holds true about the positive assessment of R&D stocks for **Chemicals** and **Machinery**.

* (Linear model does not capture this but) market does appreciate R&D spending by the Electric Equipment companies when the R&D stock levels exceed the lower quartile of the observed range.

* Thus, R&D spending is actually universally important for all industries

---
count: false

# OLS regression

<table class="table table table-striped table-hover table-condensed" style="width: auto !important; margin-left: auto; margin-right: auto; font-size: 15px; margin-left: auto; margin-right: auto;">
 <thead>
  <tr>
   <th style="text-align:left;color: white !important;background-color: black !important;">   </th>
   <th style="text-align:center;color: white !important;background-color: black !important;"> OLS </th>
   <th style="text-align:center;color: white !important;background-color: black !important;">  OLS (Industrial) </th>
  </tr>
 </thead>
<tbody>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Constant </td>
   <td style="text-align:center;"> −0.316 (0.055)*** </td>
   <td style="text-align:center;"> −0.407 (0.068)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> D (Electric) </td>
   <td style="text-align:center;"> 0.069 (0.015)*** </td>
   <td style="text-align:center;"> 0.068 (0.076) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> D (Machinery) </td>
   <td style="text-align:center;"> 0.012 (0.029) </td>
   <td style="text-align:center;"> 0.255 (0.069)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> D (Pharm) </td>
   <td style="text-align:center;"> 0.356 (0.025)*** </td>
   <td style="text-align:center;"> 0.268 (0.132)* </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;"> R&amp;D/Assets (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.019 (0.066) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.608 (0.096)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> R&amp;D/Assets x Electric </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.288 (0.093)** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> R&amp;D/Assets x Machinery </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.611 (0.178)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> R&amp;D/Assets x Pharm </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.537 (0.204)** </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;background-color: green !important;"> Patents/R&amp;D (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;background-color: green !important;"> 0.024 (0.081) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;background-color: green !important;"> 1.018 (0.156)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Electric </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.916 (0.207)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Machinery </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −2.640 (0.251)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Pharm </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.729 (0.520) </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;"> Citations/Patents (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.058 (0.013)*** </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> −0.014 (0.018) </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Citations/Patents x Electric </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.187 (0.026)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Citations/Patents x Machinery </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.103 (0.026)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Citations/Patents x Pharm </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.033 (0.037) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> R&amp;D Intensity </td>
   <td style="text-align:center;"> 0.738 (0.118)*** </td>
   <td style="text-align:center;"> 0.044 (0.130) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Process Innovation </td>
   <td style="text-align:center;"> 0.033 (0.011)** </td>
   <td style="text-align:center;"> 0.032 (0.011)** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Leverage </td>
   <td style="text-align:center;"> 1.287 (0.038)*** </td>
   <td style="text-align:center;"> 1.086 (0.042)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> ROA </td>
   <td style="text-align:center;"> 2.716 (0.106)*** </td>
   <td style="text-align:center;"> 2.656 (0.106)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Capital Intensity </td>
   <td style="text-align:center;"> 0.038 (0.005)*** </td>
   <td style="text-align:center;"> 0.045 (0.005)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;box-shadow: 0px 1.5pxfont-weight: bold;"> Age </td>
   <td style="text-align:center;box-shadow: 0px 1.5px"> −0.001 (0.000)*** </td>
   <td style="text-align:center;box-shadow: 0px 1.5px"> −0.001 (0.000)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: blue !important;font-weight: bold;"> Num.Obs. </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 6903 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 6903 </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: blue !important;font-weight: bold;"> R2 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 0.292 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 0.310 </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> RMSE </td>
   <td style="text-align:center;"> 0.41 </td>
   <td style="text-align:center;"> 0.40 </td>
  </tr>
</tbody>
</table>

???

# Patents per Japanese Yes spent on R&D

* Only **Chemicals** stand out for their R&D spending that translates into more inventions valued by market.

---
count: false

# OLS regression

<table class="table table table-striped table-hover table-condensed" style="width: auto !important; margin-left: auto; margin-right: auto; font-size: 15px; margin-left: auto; margin-right: auto;">
 <thead>
  <tr>
   <th style="text-align:left;color: white !important;background-color: black !important;">   </th>
   <th style="text-align:center;color: white !important;background-color: black !important;"> OLS </th>
   <th style="text-align:center;color: white !important;background-color: black !important;">  OLS (Industrial) </th>
  </tr>
 </thead>
<tbody>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Constant </td>
   <td style="text-align:center;"> −0.316 (0.055)*** </td>
   <td style="text-align:center;"> −0.407 (0.068)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> D (Electric) </td>
   <td style="text-align:center;"> 0.069 (0.015)*** </td>
   <td style="text-align:center;"> 0.068 (0.076) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> D (Machinery) </td>
   <td style="text-align:center;"> 0.012 (0.029) </td>
   <td style="text-align:center;"> 0.255 (0.069)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> D (Pharm) </td>
   <td style="text-align:center;"> 0.356 (0.025)*** </td>
   <td style="text-align:center;"> 0.268 (0.132)* </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;"> R&amp;D/Assets (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.019 (0.066) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.608 (0.096)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> R&amp;D/Assets x Electric </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.288 (0.093)** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> R&amp;D/Assets x Machinery </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.611 (0.178)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> R&amp;D/Assets x Pharm </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> 0.537 (0.204)** </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;"> Patents/R&amp;D (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.024 (0.081) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 1.018 (0.156)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Electric </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.916 (0.207)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Machinery </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −2.640 (0.251)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Patents/R&amp;D x Pharm </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.729 (0.520) </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: grey !important;font-weight: bold;"> Citations/Patents (x Chemical) </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> 0.058 (0.013)*** </td>
   <td style="text-align:center;color: white !important;background-color: grey !important;"> −0.014 (0.018) </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;background-color: green !important;" indentlevel="1"> Citations/Patents x Electric </td>
   <td style="text-align:center;background-color: green !important;">  </td>
   <td style="text-align:center;background-color: green !important;"> 0.187 (0.026)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;background-color: green !important;" indentlevel="1"> Citations/Patents x Machinery </td>
   <td style="text-align:center;background-color: green !important;">  </td>
   <td style="text-align:center;background-color: green !important;"> 0.103 (0.026)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;padding-left: 6em;font-weight: bold;" indentlevel="1"> Citations/Patents x Pharm </td>
   <td style="text-align:center;">  </td>
   <td style="text-align:center;"> −0.033 (0.037) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> R&amp;D Intensity </td>
   <td style="text-align:center;"> 0.738 (0.118)*** </td>
   <td style="text-align:center;"> 0.044 (0.130) </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Process Innovation </td>
   <td style="text-align:center;"> 0.033 (0.011)** </td>
   <td style="text-align:center;"> 0.032 (0.011)** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Leverage </td>
   <td style="text-align:center;"> 1.287 (0.038)*** </td>
   <td style="text-align:center;"> 1.086 (0.042)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> ROA </td>
   <td style="text-align:center;"> 2.716 (0.106)*** </td>
   <td style="text-align:center;"> 2.656 (0.106)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> Capital Intensity </td>
   <td style="text-align:center;"> 0.038 (0.005)*** </td>
   <td style="text-align:center;"> 0.045 (0.005)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;box-shadow: 0px 1.5pxfont-weight: bold;"> Age </td>
   <td style="text-align:center;box-shadow: 0px 1.5px"> −0.001 (0.000)*** </td>
   <td style="text-align:center;box-shadow: 0px 1.5px"> −0.001 (0.000)*** </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: blue !important;font-weight: bold;"> Num.Obs. </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 6903 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 6903 </td>
  </tr>
  <tr>
   <td style="text-align:left;color: white !important;background-color: blue !important;font-weight: bold;"> R2 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 0.292 </td>
   <td style="text-align:center;color: white !important;background-color: blue !important;"> 0.310 </td>
  </tr>
  <tr>
   <td style="text-align:left;font-weight: bold;"> RMSE </td>
   <td style="text-align:center;"> 0.41 </td>
   <td style="text-align:center;"> 0.40 </td>
  </tr>
</tbody>
</table>

???

# Citations per Patent

* **Electrical Equipment** and **Machinery**: peculiar for receiving market premium for more influential patents.

* Thus, quality of patents is particularly important for the **manufacturing** sector

* For **Chemicals**, based on GAMs, there is an evidence of a positive market reaction when the Cit/Pat ratio rises from 3 to 6

---
# Generalized Additive Models (GAMs)

.panelset[
.panel[.panel-name[R&D]

]

.panel[.panel-name[Patent per R&D yen]

]

.panel[.panel-name[Citations per Patent]

]

.panel[.panel-name[R&D Intensity]

]

.panel[.panel-name[Process Innovation]

]

.panel[.panel-name[Age]

]

???

* With the medium age of the companies analyzed being 59 years, it can be concluded from the Figure that TSE expects companies with the age below this median value to be *less* innovative as they get older.

* The opposite also holds true: firms that passed the median-age threshold are seen to be more likely to generate knowledge as their age increases.

* In other words, new market entrants as well as the undoubtedly experienced players tend to be more attractive to investors.

---

# Conclusions

> 
**1.** Institutional features associated with .white.bg-black[R&D spending] provide valuable signals for investors across multiple industries.
>

???

* Most of the companies, but especially the ones belonging to **Pharm** and **Chemical** industries are still embedded in a system of industrial coordination. Oligopolistic features still prevalent

> 
**2.** Quality of a patented output .white.bg-black[(Citations per Patent)] mostly matters for the manufacturing sector.
>

???

* Thereby these companies react to the accumulating competitive pressures and are redefining themselves within an open-market system

> 
**3.** Pronounced nonlinear trend in the market perception of .white.bg-black[corporate age]: only the more experienced companies receive market premium as they get older.
>

## Limitations

* Only utilized the JPO data, need to look at **Triadic Patents** as well

* Find out the updated **depreciation rates** for the knowledge stocks (per industry)

* Possibly including **corporate governance** and **shareholding structure** to better capture the institutional aspects of innovation

---

# References

Goto, A. and K. Motohashi (2007). "Construction of a Japanese Patent
Database and a First Look at Japanese Patenting Activities". En. In:
_Research Policy_ 36.9, pp. 1431-1442. ISSN: 00487333. DOI:
[10.1016/j.respol.2007.06.005](https://doi.org/10.1016%2Fj.respol.2007.06.005).

Griliches, Z. (1981). "Market Value, R&D, and Patents". En. In:
_Economics Letters_ 7.2, pp. 183-187. ISSN: 0165-1765. DOI:
[10.1016/0165-1765(87)90114-5](https://doi.org/10.1016%2F0165-1765%2887%2990114-5).

Hall, B. H., A. Jaffe, and M. Trajtenberg (2005). "Market Value and
Patent Citations". In: _RAND Journal of economics_, pp. 16-38. ISSN:
0741-6261.

Kogut, B. and U. Zander (1992). "Knowledge of the Firm, Combinative
Capabilities, and the Replication of Technology". In: _Organization
Science_ 3.3, pp. 383-397. ISSN: 1047-7039. DOI:
[10.1287/orsc.3.3.383](https://doi.org/10.1287%2Forsc.3.3.383).

---

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