How Patent Function Integration with R&D Influence the Value of Patents

Patent strategies are endogenous to firm appropriability. However, to what extent does firm’s R&D teams’ engagement with patent experts influence the value of patents? We estimate the relationship between firm’s R&D use of patent functions on patent value in Biotech firms. Controlling for characteristics of scientific team, firm effects, and other patent value indicators, we find that having a firm specific (in-house) internal patent function is a driver of patent value. In addition, we find that the way in which patent functions create patent value differs dependent on whether the firm has internal patent function or not. In-house patent functions create value through narrow patents, whereas, firms with no in-house patent function create valuable patents by the use of broader scoped patents. Our results point to a strong effect of firm specific patent functions, but also explain how firms with no in-house patent function mitigates and generate valuable patents by focusing on broader patents. The findings emphasize that managerial decisions on organizational setup of patent functions are critical for firm success in creating valuable patents and adds to the literature on how patenting are endogenous to firm appropriability.