Technology Differentiation and Firm Performance

Samuel Arts, Bruno Cassiman and Jianan Hou

No 688662, Working Papers of Department of Management, Strategy and Innovation, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven

Abstract: Prior work has extensively studied how investing in R&D and building a technology portfolio relate to superior firm performance. However, the value of a firm’s technology portfolio should also be driven by the degree to which it is more unique and technologically differentiated from other firms. To study this research question, we develop a new method to characterize firm technology based on the semantic content of patent portfolios that allows us to map a firm’s competitive position in the technology space relative to all other firms and to measure the differentiation of a firm’s technology portfolio. Using a large panel of U.S. public firms from 1980 to 2015, we find that technology differentiation has a strong positive and long-lasting relation with firm performance. Moreover, differentiated firm technology is particularly valuable in industries with higher R&D intensity and with stronger product market competition. We provide open access to all code and data to measure the technology similarity and the technology differentiation of U.S. public firms.

Pages: 28
Date: 2022-01-21
New Economics Papers: this item is included in nep-com, nep-dem, nep-ino, nep-sbm and nep-tid
Note: paper number MSI_2201
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Published in FEB Research Report MSI_2201, pages 1-28

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Persistent link: https://EconPapers.repec.org/RePEc:ete:msiper:688662

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