Two essays on the linkages of market value of the firm, knowledge flows, patent and patent citations, geographic competitive advantage and innovation resources
Boasson, Vigdis Wangchao
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This dissertation consists of two essays examining the linkages among the stock market valuation of the firm, knowledge flows, patent and patent citations, geographic competitive advantage and innovation resources. The first essay examines the effects of geographic competitive advantage on firm value among publicly-traded pharmaceutical companies in the United States. A central argument is that firm value responds positively to geographic factors. I hypothesize that firm value is influenced by the degree of industry clustering, university and industrial R&D spending, the presence of related or supporting industries, and the proximity of competitors. The empirical results lend support to my hypotheses. Even after controlling for the firm value determinants used by Fama and French (1998), geographic variables explain a significant part of the cross-sectional variation in firm value. The second essay investigates whether, why, and how a firm's stock market valuation might be impacted by the relationship between geographic sources of innovation and knowledge flows. With a step-by step investigation approach, I find a linkage connecting the stock market valuation of the firm, citation-weighted patent stocks, and geographic sources of innovation. The interplay between these relationships affects the stock market valuation of the firm. My first hypothesis is confirmed by Moran's I statistics. Information and knowledge flows which are crucial for investors to form their value judgments are affected by spatial barriers as evidenced by the spatial clustering of patent citations. The empirical findings confirm my second hypothesis that there is a positive external impact of the geographic sources of innovations upon a firm's citation-weighted patent stocks. Finally, empirical results lend strong support to my third hypothesis that the citation-weighted patent stock for the firms that are endowed with greater geographic innovation resources has a greater positive impact upon the stock market valuation for their investments in knowledge and innovation productions as measured by Tobin's Q and risk-adjusted returns.