The purpose of this paper is to introduce patent litigation as a leading indicator of market growth. We model the intensity of patent litigation and the market growth for the personal computer and cellular phone market in the US. By means of these analytic models, we show that patent litigation is a leading indicator to market growth. We are also able to very precisely delineate discrete stages of the product’s market life cycle and demarcate the time when life-cycle transitions are about to take place. We close this paper with a discussion on new lines of patent research that are potentially useful for managerial practice and for investment decisions.
Patents have been used to analyze the diffusion of knowledge as a productive asset that creates economic growth. Patent renewal information has been a line of research to determine its relationship to economic growth. However, the visibility is thin regarding the nature of the mechanisms of knowledge flow. To address this void, a major line of research has been to investigate patent citations as a mechanism of knowledge spillover. The literature demonstrates that there are linkages between patent activity and macroeconomic growth through citations across institutional and geographic boundaries.
The objective of this paper is to address such a direct link and discuss potential new research directions. We show that the intensity of patent litigation is an indicator to determine the timing and rate of market growth. Although patent litigation has a line of investigation [15,16], we are not aware of analysis that uses patent litigation as leading indicator to market growth. We use the personal computer (PC) and the cellular phone markets to test our hypothesis. Using measures of patent litigation intensity (PLI) and market growth, we are able to express their relationship in mathematical form and thus establish the linkage between patent litigation intensity and market growth. We will discuss the limitations of our analysis, as well as, new potential research to develop a unifying framework to connect patent activities to market growth. We close this paper with a discussion of the implications to managerial practice and to financial investments in new and emerging high technology markets.
