Time-limited monopolies: Firms' financial characteristics and innovation concentration

Abstract

I develop novel innovation classification systems using firms' patent portfolio text and CPC codes to study market concentrations/monopoly power. My annual text network explains firms' financial characteristics better than most existing systems among public, patenting firms, and offers additional explanatory power for private, patenting firms. I attribute increases in explanatory power to my network's ability to update classifications at an annual frequency. Upon evaluating measures of industry concentration for sales and R&D, my network confirms increases in sales concentration and reveals an increase in R&D concentration that is unobserved when categorizing firms via four-digit NAICS or three-digit SIC codes.