Overview

The contribution of research and development to a company's market value has grown considerably in recent years. In the mid-1970s, accountants were able to capture on their ledgers 90-95 per cent of a firm's book value, but by 2000 the importance of intangible assets had grown to the point where they could account for only 13-15 per cent. Financial economists and accountants have investigated the link between a firm's market value and its R&D spending, and various factions advocate a variety of positions on the amount and rate of investment, investors' ability to capture returns on that investment, and ways to measure value, investment, and returns. 'Tech Stock Valuation' extends the R&D literature by providing detailed direct evidence on the market value implications of inventive and innovative output. Specifically, the book demonstrates that stock-price effects of patent output are most pronounced in the case of of high-quality patents, where patent quality is measured by scientific merit. Scientific measures of patent quality give tech stock investors and R&D managers a valuable new tool that can be used to measure R&D program effectiveness. At the same time, it gives investors a new tool to help them assess the value of hard-to-measure intangible assets.

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9780123497048

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The impact of the highly variable capital market conditions--such as we saw during the late 1960s, the mid 1980s, and the late 1990s--on the evolution of high-technology industries remains little understood, but is critically important to the future growth of the U.S. economy. Tech Stock Valuation takes an initial look at some of these very important but complex issues. --Josh Lerner, Jacob H. Schiff Professor of Investment Banking, Harvard Business School, Boston, Massachusetts, U.S.A.

Author Information

Mark Hirschey is the Anderson Chandler Professors of Business at the University of Kansas.

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