Abstract:

This study examines how the environmental scope of a granted patent influences its market value. Drawing on signaling theory, we argue that the environmental scope of a granted patent functions as a credible signal to investors of the firm’s environmental innovation capability. Moreover, we propose that the positive market reaction to this signal is conditional on investors’ assessment of the firm’s capacity to appropriate the returns it promises. Empirically, we use patent-level data (2013–2020) on 187,476 patents granted to 157 U.S. publicly traded manufacturing firms that disclose emissions through the Carbon Disclosure Project (CDP). Results from high-dimensional fixed-effects models show that the broader a patent’s environmental scope, that is, the more distinct green technological domains it spans, the higher its market value at the time of grant. This positive effect is attenuated by the extent to which investors understand the firm’s opportunity to use and derive returns from green patented technologies, which largely depend on value-chain partners, reflecting investors’ adjustment for delayed and only partially appropriable returns. The paper concludes by discussing the theoretical and policy implications of these results.

Please choose your submission type: Developmental Paper

Primary Track: Sustainable and Responsible Business

Keywords: responsible business;CSR

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Mr. Marcelo Gonzalez