| Abstract: |
We match patents to products using natural language methods applied to
detailed product descriptions and patent texts in the consumer goods sector.
While more than half of product innovations originate from non-patenting
firms, patent filings are on average followed by subsequent product
introductions. Yet this relationship weakens with firm size. Patents held by
market leaders also yield revenue premiums beyond what can be explained by
their own product introductions and are associated with stronger deterrence of
competitors’ innovations. To interpret these findings, we develop a simple
growth model in which larger firms have stronger incentives to engage in
strategic patenting—filing for protection rather than market innovation—which
dampens innovation and slows creative destruction. |