Using patent data to measure innovation performance

Technologically radical innovations are a key success factor in many high technology industries. This study examines how firms can measure performance on this key dimension. I ask two questions; 1, how can patent data be used to measure innovation and its radicalism, and 2, what are some of the empirical shortcomings with the current methods using patent data? These research questions are examined through a longitudinal data of 100 biopharmaceutical companies. Two main conclusions are drawn. First, patents and the subsequent patents that cite them provide a useful way to measure innovation performance. Patent data can be used to monitor activities of competitors, form a performance evaluation system in R&D organisations, and identify a specific technological trend. Second, in prior research, patent citation lags used to distinguish between innovations of different quality have been too short to distinguish between incremental and radical innovations. Lags of ten years and longer are recommended. Short lags may obscure patent-based comparisons of firm innovativeness.