Are patents a good measure of exploration? I don’t think so

At the EURAM conference this week I attended at least two presentations in which the authors measure exploration with patents. This is actually a measure which has been used in the literature. But I think it is problematic. Exploration is experimentation, search beyond the domain in which the “explorer” already has knowledge, thus an effort to learn about a new domain (March, 1991).

In contrast, patents are a legal certification of successful exploration, i.e. an official statement from a regulatory authority that the firm has succeeded in going beyond the pre-existing state of the art in a given technological or scientific field. Thus, patents only capture successful exploration relative to the entire technological field, much beyond the focal, innovating organization.

However, many firms might undertake exploration efforts which don’t lead to patents. First, we know that patents are only prevalent in few industries (e.g. pharma). But more importantly many exploration efforts might fail, that is, the firm might not succeed in learning about the new domain (March, 1991; Levinthal & March, 1993).

March, J. 1991. Exploration and exploitation in organizational learning. Organization Science, 2: 71-87.

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