Technology Differentiation and Firm Performance

30 Pages Posted: 20 Dec 2021

See all articles by Sam Arts

Sam Arts

Katholieke Universiteit Leuven - Faculty of Business and Economics (FBE)

Bruno Cassiman

Harvard University - Business School (HBS)

Jianan Hou

KU Leuven - Faculty of Economics and Business

Date Written: December 15, 2021

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.

Suggested Citation

Arts, Sam and Cassiman, Bruno and Hou, Jianan, Technology Differentiation and Firm Performance (December 15, 2021). Harvard Business School Strategy Unit Working Paper No. 22-040, Available at SSRN: https://ssrn.com/abstract=3988838 or http://dx.doi.org/10.2139/ssrn.3988838

Sam Arts

Katholieke Universiteit Leuven - Faculty of Business and Economics (FBE) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Bruno Cassiman (Contact Author)

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Jianan Hou

KU Leuven - Faculty of Economics and Business ( email )

Korte Nieuwstraat 33
2000 Antwerpen
Belgium

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