Re-examine the relationship between patents and Tobin’s q

Since the relationship between patents and Tobin’s q is confusing, this paper utilizes panel threshold regression model to re-examine the relationship between patent counts/sales and Tobin’s q. This study finds out patent citations/sales has a single threshold effect on the relationship between patent counts/sales and Tobin’s q in the US pharmaceutical industry. The single threshold value of patent citations/sales is 328.81, and it divides the value of patent citations/sales into two regimes: the first regime (patent citations/sale ≦ 328.81) and the second regime (patent citations/sale > 328.81). The results indicate that patent counts/sales positively affect Tobin’s q in the two regimes. In addition, this study demonstrates that the extent of the positive effect of patent counts/sales on Tobin’s q is different. This study verifies that patent citations/sales moderates the relationship between patent counts/sales and Tobin’s q. Once patent citations/sales is below the threshold value, the extent of the positive relationship between patent counts/sales and Tobin’s q is the most. Therefore, this study finds out that the first regime is optimal.