Firm Growth through Product Offerings

with Leo Liu and Wing Wah Tham.

Abstract: We use textual analysis of high-dimensional data from USPTO trademark documents to develop novel measures of product offerings for public and private firms across all industries from 1926-2020. We classify products, both goods and services, into three categories: 1) business stealing, 2) quality improving, and 3) new variety products and measure the economic value of each product. The USPTO’s stringent requirements of 1) evidence through a specimen and detailed description on how the mark is used in commerce; and 2) the date of first use of the mark in commerce for trademark applications, maintenance, and renewal, allow us to accurately track firms’ evolving product portfolios. Our measures capture the evolution of product waves over the last half century and the emergence of breakthrough (new variety) products. Stock market reactions around the products’ first-use-in-commerce align with future product sales. Firms introduce fewer new variety products, yet these offerings contribute significantly to firm growth. Firms focusing on business stealing grow through acquisitions, whereas firms make more R&D investments to fuel new variety creation.