We build a new concordance between the NBER Patent Data and U.S. Census microdata and use it to examine what happens when firms patent. We find strong evidence that increases in patent stock are associated with increases in firm size, scope, and skill and capital intensity. We find somewhat weaker evidence that changes in patenting are positively correlated with changes in total factor productivity. We also analyze first-time patentees and find similar effects following initial patent application. Together, these results suggest that patenting is indeed associated with real changes within firms, in particular with growth through increases in scope.

We propose an industry-level index of capital resalability—the share of used capital in aggregate industry capital expenditure—that relates (inversely) to sunkenness of investments. Using data from U.S. manufacturing, we then test the effect of capital resalability on industry productivity dispersion, mean productivity, and industry concentration. As predicted by standard models of industry equilibrium with heterogeneous firms, we find that increases in capital resalability are associated with a reduction in productivity dispersion, and an increase in the mean and median of the productivity distribution. Furthermore, we find that capital resalability is negatively correlated with industry concentration.