Egan (2012) - The Economics of Patent Citations

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Has article title The Economics of Patent Citations
Has author Egan
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©, 2016


This is a Working Paper. Please do not distribute; refer interested parties to this page instead.

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Current reference:

  • Egan, Edward J. (2012), "The Economics of Patent Citations: Startup Commercialization Strategy, Value, and Success", presented at "Patent Statistics for Decision Makers", USPTO, November 15-17th 2011, Alexandria, Virginia.


We use three important outcomes for startup firms to shed light on the underlying economic meaning of patent citations; and in turn we use our new understanding of patent citations to reveal how a startup's technology influences its commercialization strategy, likelihood of success, and value when successful. Using samples that almost comprise the population of successful startups and failed venture capital backed firms, which experienced their liquidity event between 1986 and 2006, and a reference dataset of all U.S. patents from 1963-2006, we find that patent citations contain useful economic information that reveals complementary and substitution effects in the innovation-based relationships that startups have with other patent-holders. Our results provide a coherent picture of start-ups that achieve initial public offerings patenting more radical inventions and acting as a force for creative destruction. The substitution effect of some patents also resolves a puzzle in the literature of why receiving more citations does not make patents more valuable for certain patent-holders.



This paper is currently being reviewed by my advisors and colleagues. After feedback has been received, it will be edited for length, have all outstanding concerns addressed, and then be submitted for review at a journal.