On the Profitability of Innovative Assets

Successful innovative activity is a major contribution to the intangible capital of firms. Although its importance is generally acknowledged, the contribution to companies’ profits is a priori unclear. We present the results of an empirical study on the effects of the patent stock on profitability. The data base is a representative sample of German manufacturing firms and we use a number of control variables including measures of competition and firm leadership. It turns out that the patent stock has a strong and robust effect on profitability.

Czarnitzki, Dirk and Kornelius Kraft (2004), On the Profitability of Innovative Assets, ZEW Discussion Paper No. 04-38, Mannheim, published in: Applied Economics.