FIRM SIZE, MARKET STRUCTURE, OPPORTUNITY, AND THE OUTPUT OF PATENTED INVENTIONS.

This article reports on a statistical study of the relationships between inventive activity and technological opportunity, firm size, product-line diversification and monopoly power. The underlying economic (or technological) significance of any sampled patent can also be interpreted as a random variable with some probability distribution. The greater the sales of a firm in any given market, the more incentive and resources the firm has to generate patentable inventions related to that market. Profitable exploitation of market power is the easiest way to assemble the funds necessary for investment in new technology. If structural market power has a beneficial effect on the output of patented inventions, it is a very modest effect indeed. The principal conclusions of this study are that inventive output increases with firm sales, but generally at a less than proportional rate. Differences in technological opportunity, for example, differences in technical investment possibilities unrelated to the mere volume of sales and typically opened up by the broad advance of knowledge, are a major factor responsible for interindustry differences in inventive output and inventive output does not appear to be systematically related to variations in market power, prior profitability, liquidity, or (when participation in fields with high technological opportunity is accounted for) degree of product line diversification.