Affiliation:
1. Facebook, Seattle, Washington 98109;
2. Leeds School of Business, University of Colorado, Boulder, Colorado 80309
Abstract
We develop a new measure of innovation using the text of analyst reports of S&P 500 firms. Our text-based measure gives a useful description of innovation by firms with and without patenting and R&D (research and development). For nonpatenting firms, the measure identifies innovative firms that adopt novel technologies and innovative business practices (e.g., Walmart’s cross-geography logistics). For patenting firms, the text-based measure strongly correlates with valuable patents, which likely capture true innovation. The text-based measure robustly forecasts greater firm performance and growth opportunities for up to four years, and these value implications hold just as strongly for innovative nonpatenting firms. This paper was accepted by Gustavo Manso, finance.
Publisher
Institute for Operations Research and the Management Sciences (INFORMS)
Subject
Management Science and Operations Research,Strategy and Management
Cited by
135 articles.
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