Patenting Activity And Elements Of Market Structure In The

Technological opportunity and expected profit positively influence the number of patents in relation to sales, while industry size and concentration negatively affect that relationship. The results of the analysis, which uses data on the Dutch manufacturing industry, suggest that external inventors contribute to inventive activity. The policy implication of the results is that inventive activity should be stimulated in as many small firms as possible. The analysis gives no definite answer as to whether patents can be used as proxies for inventive and innovative activity. A contradictory relationship between the research and development to sales ratio and the patents to sales ratio that is found is merely indicative of the fact that research based on firm data and industry data can come up with very different results. As a whole, the results suggest that, for studies on the Dutch manufacturing industry, aggregation from firm level to industry level should be done cautiously.