CKGSB Professor Danqing Mei Shares Research Revealing New Way to Measure Innovation Beyond Patents

Most measures of innovation focus on patents—but patents don’t tell the full story. Many breakthroughs never reach the market, and even when they do, the real value comes from successfully commercializing those ideas. CKGSB Assistant Professor of Finance Danqing Mei shared his latest study at the school’s latest academic seminar on how real economic impact comes when companies successfully turn inventions into products.

By tracking stock market reactions to product launches, Professor Mei and his fellow co-authors have developed a “product value” measure that captures how innovations are turned into customer-facing products, highlighting the true payoff of commercialized innovation.

The study analyzes stock market reactions to product announcements, comparing “patent value” (the potential payoff from invention) with “product value” (the realized payoff from commercialization). It demonstrates that innovation creates external benefits for the broader economy, often exceeding the direct returns captured by the innovating firm.

Key findings:

• Commercialization matters: Individual product launches generate substantially higher economic value than patents alone, though fewer innovations make it to market.
• Predicting firm growth: Firms with higher product value experience sustained growth over 1–5 years, showing that commercialization drives long-term success.
• Patents vs. products: While patents signal potential, product value explains much of the link between innovation and growth, underscoring that invention alone isn’t enough.
• Competitive dynamics: Rival product launches can spur leaders to innovate more aggressively while discouraging less advanced firms, revealing how innovation shapes market competition.

This work in progress emphasizes that the true impact of innovation goes beyond the laboratory or R&D department. By focusing on commercialized outcomes, companies, investors, and policymakers can better understand which innovations drive growth, influence markets, and contribute to broader economic progress.