• 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

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

• 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

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.

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].

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

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

• 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.

• 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

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