Unintended Consequences of End-of-Year Rush Toward Innovation: Evidence from Patent Application Filings*

Abstract

This study employs novel data on patents filed in Korea to investigate whether there is an end-of-year rush phenomenon for innovation. Our findings indicate that patent applications tend to be concentrated in the second half of the year more than in the first half of the year, and the number of application filings gradually increases toward the end of the year. We also examine the quality of patents and find that applications filed near the end of the year are more likely to be low-quality innovations. Firms in our sample that filed more patent applications in the second half of the year engaged in incremental innovation, which entails the exploitation of existing knowledge or research areas rather than the exploration of new knowledge in new areas. Furthermore, our study reveals that this end-of-year rush on innovation is more prevalent among firms with high free cash flow and among firms belonging to business groups. Our findings demonstrate that the end-of-year rush has unintended consequences for innovation.