Valuation of Patent under Uncertainty: A Real Option Perspective

Innovation has become a key to corporate success, so many information electronic companies apply patents to protect theirs new technology. The application of real option theory (ROT) is suitable for valuing patent, because of the higher degree of uncertainty and operational flexibility connected to the technology innovation and market volatility. The 214 listed firms in Taiwan electronic industry are examined based on analysis of patent and citation dataset comprised of all patents granted by the U.S. Patents of Trademark Office (USPTO). Under market and technology uncertainty factors using option perspective to assess firm’s market value. There are three empirical finding:(1) When a company faces market uncertainty, patents are helpful for a company to create value. (2)The companies can’t raise market value under technology uncertainty. (3) This study use three indicators to measure patent including quantity indicators (number of patents, priority) and quality indicator (cites per patent). All have a positively impact on firm’s value.

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