Innovation and market value in newly-industrialized countries: The case of Taiwanese electronics firms

The relationship between patents, research and development (R and D), and market value in newly industrialized countries is examined for a panel data of Taiwanese electronics firms. Empirical results show that the market value of electronics firms is strongly related to patent count and R and D expenditure in Taiwan. Controlling potential heterogeneity of patents and allowing the value of Tobin's q to vary across firms, the estimated results are quite consistent, which is encouraging for Taiwan's government as it has implemented many policies encouraging firms to commit to R and D. In addition, the significant and positive impact of the sales growth rate might reflect the expectation feature of the stock market.