Edited by Derek Bosworth and Elizabeth Webster
Chapter 8: Market Valuation of Australian Intellectual Property
William Grifﬁths and Elizabeth Webster 1 INTRODUCTION Company-level ‘market value’ studies seek to estimate the returns to investment using stock market, book value and intellectual property (IP) data. These studies, which were initiated by Griliches (1981), aim to establish whether intangible assets, especially those arising from innovation, contribute to future company proﬁts. In some ways this issue is trivial, since we would not expect companies to repeatedly invest in intangible capital unless they previously had positive returns. Predictably therefore, we ﬁnd that signiﬁcant and positive relationships between patents and the value of the company have become a ‘stylized fact’ around the world. Instead of seeking to reconﬁrm this ‘fact’, applied economists are now using this model to test whether the value of innovative activities varies with characteristics such as company size, industry and competition, among other things. This chapter uses annual data from over 300 Australian companies from 1989 to 2002 to examine the relationship between the effort companies make creating intangible assets activity and future anticipated proﬁts. Although there have been other company level estimations of this model (that is, Bosworth and Rogers 2001), there have been no previous Australian company studies which span a long time period before. This type of data set, which is called ‘panel data’, is a combined cross-sectional time-series data. Panel estimation techniques use the information embodied in this data to control for unmeasured-company characteristics that do not vary over time. Examples of these characteristics include the expertise of...
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