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The Size Distribution of Profits from Innovation

  • Frederic M. Scherer
Chapter

Abstract

— This paper reports on research seeking to determine how skew the distribution of profits from technological innovation is — i.e., whether it conforms most closely to the Paretian, log normal, or some other distribution. The question is important, because high skewness makes it difficult to pursue risk-hedging portfolio strategies, and it may have real business cycle consequences. Data from several sources are examined: the royalties from U.S. university patent portfolios, the quasi-rents from marketed pharmaceutical entities, the stock market returns from three large samples of high-technology venture startups, and preliminary results from a survey of German patents on which renewal fees were paid until full-term expiration in 1995. The evidence reveals a mixture of distributions, some close to log normality and some Paretian. Preliminary hypotheses about the underlying behavioral processes are advanced.

Keywords

Venture Capital Initial Public Offering Venture Capital Fund Technology License Venture Capital Industry 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Science+Business Media Dordrecht 2000

Authors and Affiliations

  • Frederic M. Scherer
    • 1
  1. 1.Harvard UniversityUSA

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