Do firms face a trade-off between the quantity and the quality of their inventions?

This paper presents evidence that firms face a trade-off between the quantity and the quality of their research output. The econometric analysis uses survey data on patent applicants at the European Patent Office and addresses the identification problem caused by differences in firms’ propensity to patent. The existence of a trade-off emphasizes the need to take the quality of research output into account when assessing research productivity. It also raises questions about the optimal quantity–quality mix that firms should target.

► We show that firms face a trade-off between invention quality and quantity. ► We address the identification problem caused by differences in patent propensity. ► Invention quality must be taken into account when assessing research productivity.