Environmental Modelling & Software 18 (2003) 195–203 www.elsevier.com/locate/envsoft Modelling trends and volatility in ecological patents in the USA Dora Marinova a,* , Michael McAleer b a Institute for Sustainability and Technology Policy, Murdoch University, Murdoch, WA 6150, Australia b Department of Economics, University of Western Australia, 35 Stirling Highway, Crawley, WA 6009, Australia Received 17 October 2001; received in revised form 17 February 2002; accepted 16 October 2002 Abstract Ecological patent registrations have been increasing in the USA steadily over time. The paper analyses trends and volatility in US ecological patents in the USA from 1975 to 1997. Germany contributed more than 10% of the total number of US ecological patents, and has been by far the strongest foreign performer. The time-varying nature of the volatility of the ecological patent share, namely the ratio of US ecological patents to total US patents, is examined using monthly data from January 1975 to December 1997. As negative and positive movements in the patent share may have differential impacts on innovative activity, and hence on volatility, both symmetric and asymmetric models of volatility are estimated. The asymmetric AR(1)-GJR(1,1) model is found to be suitable for modelling the ecological patent share in the USA.  2003 Elsevier Science Ltd. All rights reserved. Keywords: Ecological patents; Patent share; Innovation; Trends; Volatility; GARCH; GJR; Asymmetry; Shocks 1. Introduction Ecological problems such as global warming, ozone layer depletion, land erosion, depletion of natural resources and acid rain have drawn the attention of poli- ticians and researchers globally to the challenge of eco- logically sustainable development. Since the United Nations Conference on the Environment and Develop- ment in Rio de Janeiro in 1992, the business community has established the International Business Council for Sustainable Development to promote technologies that are less harmful to the environment. The voluntary environmental standards ISO 14000 have been developed to establish continually improving processes for environmentally responsible behaviour. There has also been a higher level of research and development (R&D) investment channelled into research that is related to the ecological environment. The patent system is a firmly entrenched component of the economic and industrial environment in which technologies and trade links are developed. Since the mid-1970s, patenting has become a powerful tool for * Corresponding author. Tel: +61-8360-6103; fax: +61-89360-6421. E-mail address: marinova@murdoch.edu.au (D. Marinova). 1364-8152/03/$ - see front matter  2003 Elsevier Science Ltd. All rights reserved. doi:10.1016/S1364-8152(02)00079-8 protecting industrial intellectual property. Patents are also conducive to economic growth, and patent data rep- resent technological knowledge development by coun- tries, companies and individuals, including potential technological strengths (Marinova and McAleer, 2002). Patenting may be regarded as essential for co-ordinat- ing market forces (see, for example, Arup, 1993; Furman et al., 2002, and Smith, 2001). Consequently, it might be expected that the efforts of the international business community to deal with environmental problems will result in more ecological innovations being patented (Lanjouw and Mody, 1996). Several studies have con- firmed that patenting activities cause immediate and sub- sequent market changes (see, for example, Soete, 1987; Griliches et al., 1991, and Ernst, 1995, 1997). Inter- national patenting has also been found to be a significant determinant in productivity performance (Fagerberg, 1987). Thus, the greater the number of ecological pat- ents, the more likely will the market economies be to adopt a course of sustainability. With its large and technologically advanced markets, the US economy has always been highly favourable to companies and individuals interested in protecting their intellectual property rights. The USA has also been very attractive to foreign residents who have been willing to establish their innovation priority. There was an unpre-