Technology Spillover Effects and Patent Announcements

Austrian Science Fund

Patent announcements might not only lead to a market response for the announcing firm but also imply information for close competitors. These spillover effects can be either positive or negative. Firstly, a patent announcement could imply technological progress in the industry from which other firms could benefit since researchers might exchange information between companies. Contrary, patent announcements can imply negative news since competitors might target the same customer group with a comparable technology which might then be less attractive.



Matching close competitors by the SIC Industry classification and by residual return correlation, I find a significantly negative market reaction around patent announcements for competitors that are technologically close. This effect for competitors tends to increase with the value of the issued patent. Concluded, market reactions around a 3 day patent announcement window imply negative spillover effects for competitors that are technologically close.