Determinants of patent renewal decisions by patent indicators and social network analysis: The case of the biotech industry in Taiwan and Korea

Patents are important knowledge assets that allow firms to defend against rivals and earn returns in a competitive environment. To maintain the rights of patents in force, firms must regularly pay renewal fees, which are a burden for R&D spending. Firms must cautiously examine the value of their patents in order to determine whether to maintain their legitimacy, thus controlling the R&D cost. The renewal decisions of firms open up an opportunity for economists and researchers to estimate the patent value. Research on patent renewal has tended to estimate patent value through patent indicators such as backward and forward citations; however, the knowledge flow among patents has not been considered. This study incorporated social network analysis to determine patent value by examining the dissemination of information mastered by a patent within the patent citation network. This study proposed that a patent that vigorously disseminates knowledge is economically valuable because it is a knowledge bridge. The study collected biotech patents in Taiwan and Korea that were granted by the US Patent and Trademark Office between 1994 and 2006. The empirical results showed that the technology knowledge momentum indicators obtained by social network analysis and a number of patent indicators provided significantly different effects on the patent renewal decisions of both Taiwanese and Korean firms and research institutes. Based on the findings, this study provided some guidelines for policy-making.