Firm markups and the economic value of innovation
Martin, R., Solorzano Mosquera, J., Thomas, C.
& Verhoeven, D.
(2025).
Firm markups and the economic value of innovation.
International Journal of Industrial Organization,
102,
https://doi.org/10.1016/j.ijindorg.2025.103186
& Verhoeven, D.
(2025).
Firm markups and the economic value of innovation.
International Journal of Industrial Organization,
102,
https://doi.org/10.1016/j.ijindorg.2025.103186
We examine the relationship between firms' markups and the economic value of their innovation, including both the private value captured by the innovating firm and the knowledge spillovers that benefit other firms. Using a sample of over 14,500 EU firms and 2,400 US firms granted patents between 2005 and 2014, we find that innovation by high-markup firms is more valuable privately and also creates more external value. These associations are robust to controlling for the stock of past innovation and to estimating innovation value in various ways.
