David Argente, Salomé Baslandze, Douglas Hanley, and Sara Moreira
Working Paper 2020-4a
April 2020 (Revised September 2025)
Abstract: We combine NielsenIQ scanner data with USPTO patent records and apply natural language processing to match detailed product descriptions to patent texts for the consumer goods sector. We show that while more than half of product innovations originate from non-patenting firms, patent filings are on average followed by subsequent product introductions. Yet this relationship weakens with firm size. Patents held by market leaders also yield revenue premiums beyond what can be explained by their own product introductions and are associated with stronger deterrence of competitors’ innovations. To interpret these findings, we develop a simple growth model in which larger firms have stronger incentives to engage in strategic patenting—filing for protection rather than market innovation—which dampens innovation and slows creative destruction.
JEL classification: O31, O34, O40
Key words: innovation, products, strategic patents, creative destruction, competition, growth
https://doi.org/10.29338/wp2020-04 
The authors thank Ufuk Akcigit, Fernando Alvarez, Antonin Bergeaud, Toni Braun, Laurent Fresard, Pete Klenow, Hugo Hopenhayn, Benjamin F. Jones, Claudio Michelacci, Jesse Perla, Juan Rubio-Ramirez, and numerous seminar and conference participants for their helpful comments. Researcher(s)’ own analyses calculated (or derived) based in part on data from Nielsen Consumer LLC and marketing databases provided through the NielsenIQ Datasets at the Kilts Center for Marketing Data Center at The University of Chicago Booth School of Business. The conclusions drawn from the NielsenIQ data are those of the researcher(s) and do not reflect the views of NielsenIQ. NielsenIQ is not responsible for, had no role in, and was not involved in analyzing and preparing the results reported herein. First draft: March 2019. The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.
David Argente (david.argente@yale.edu) is with Yale University. Salomé Baslandze (salome.baslandze@atl.frb.org) is with the Federal Reserve Bank of Atlanta. Douglas Hanley is with Compendium Labs. Sara Moreira (sara.moreira@kellogg.northwestern.edu) is with Northwestern University.
Federal Reserve Bank of Atlanta working papers, including revised versions, are available on the Atlanta Fed's website at www.atlantafed.org. Click "Publications" and then "Working Papers." To receive e-mail notifications about new papers, use atlantafed.org/forms/subscribe.