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Standard essential patents to boost financial returns
Author(s) -
Pohlmann Tim,
Neuhäusler Peter,
Blind Knut
Publication year - 2016
Publication title -
randd management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.253
H-Index - 102
eISSN - 1467-9310
pISSN - 0033-6807
DOI - 10.1111/radm.12137
Subject(s) - standardization , exploit , portfolio , business , patent portfolio , industrial organization , order (exchange) , market share , intellectual property , finance , computer science , computer security , operating system
Numerous innovative applications build upon standardized technologies. These technologies increasingly incorporate standard essential patents ( SEPs ). It is crucial to own SEPs in order to achieve and maintain significant market shares. We test the influence of owning SEPs on a firm's financial performance. In our analysis, we use a unique dataset of firms participating in international standard setting organizations ( SSOs ). Our results indicate a curvilinear (inverse U‐shaped) relationship of owning SEPs on a firm's return on assets. The curvilinear relationship suggests that firms should balance their patent portfolio by holding a share of patents, which are essential for standards, and by holding a share of patents on technologies that are not standardized. Our results further show that the effects of owning SEPs depend on the specific SSO as well as on the size of the patent portfolio. Our findings are a first step toward identifying and assessing the financial impact of patents essential to standards. Our empirical tests suggest that companies should pursue a common strategy for patenting and standardization to exploit patented inventions in technology fields where standards matter.