Filing patent application and examination request under deferred patent examination system provides inventor with option value and similar decision process on the irreversible investment under uncertainty and competition. This paper investigates firm ...
Filing patent application and examination request under deferred patent examination system provides inventor with option value and similar decision process on the irreversible investment under uncertainty and competition. This paper investigates firm decisions on whether and when to request patent examinations under a deferred patent examination system in Korea, and provides the first empirical evidences on how firms, faced with both uncertainty about investment return and market competition, make decision on its irreversible investment. We provide a simple theoretical model and show that both uncertainty in invention value and market competition has significant impact on firm’s examination requests in particular for less valued inventions, and the negative correlation between uncertainty and competition leads to the interesting bipolar distribution.