Cognitive Neighborhoods and the Valuation of Innovation: A Cross-National Analysis

Tyler Wry, Management Department, The Wharton School, and Adam Castor, Sung Kyun Kwan University

Abstract: To date, studies have focused on categories as segregating devices that distinguish between types of organizations and products. While this view has helped to advance insight about valuation and commensurability in general terms, we argue that this focus elides consideration of the ways in which categories convey patterns of similarity between different groups. Drawing on insights from cognitive psychology which assert that categories are relationally similar as a matter of degree, we argue that categories and category systems affect attention and valuation in ways that go beyond creating boundaries around clear and distinct comparison sets. We support this view with a comparative investigation of patent classes in the US, Japanese, and European patent systems. Examining patents that are applied for in each jurisdiction provides a natural experiment which allows us to isolate the effect of category structure on citations. Results show that patents are cited differently, depending on patterns of inter-category similarity in each system. This finding suggests that patent valuation is culturally inflected in ways to transcent invention quality differently valued and vary with the properties of different category systems.

Wry Castor ThumbnailWatch the authors’ interview about their research here.