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The recency of technological inputs and financial performance

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  • Michael B. Heeley
  • Robert Jacobson

Abstract

Inventions differ in terms of the age of the knowledge base they build upon. We examine what effects differences in the recency of knowledge inputs have on financial performance. Using threshold regression analysis, we isolate three regimes that exhibit different associations between recency and stock return. We find that for firms whose new patents use inputs in the mid‐range of the technological recency distribution, the relationship is positive; higher recency leads to higher stock return. However, for firms whose new patents make use of either nascent or very mature technological inputs, the effects are negative; higher recency leads to lower stock return. These findings indicate that it is not firms utilizing the most recent technological inputs that experience the highest returns to their inventive activity. Indeed, firms operating at the technological input frontier have market returns significantly below the mean. Rather, it is firms whose new patents utilize medial‐aged technological inputs (i.e., firms using inputs slightly behind the technology frontier) that tend to experience the highest returns. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Michael B. Heeley & Robert Jacobson, 2008. "The recency of technological inputs and financial performance," Strategic Management Journal, Wiley Blackwell, vol. 29(7), pages 723-744, July.
    • Handle: RePEc:bla:stratm:v:29:y:2008:i:7:p:723-744
    DOI: 10.1002/smj.682
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    Cited by:

    1. Michele Gorgoglione & Antonio Messeni Petruzzelli & Umberto Panniello, 2018. "Innovation through tradition in the Italian coffee industry: an analysis of customers’ perceptions," Review of Managerial Science, Springer, vol. 12(3), pages 661-682, July.
    2. Libo Sheng & Dongqing Lyu & Xuanmin Ruan & Hongquan Shen & Ying Cheng, 2023. "The association between prior knowledge and the disruption of an article," Scientometrics, Springer;Akadémiai Kiadó, vol. 128(8), pages 4731-4751, August.
    3. Jiaqi Wei & Ying Guo, 2024. "The effect of urban capacity in knowledge recombination on digital economy development," Scientometrics, Springer;Akadémiai Kiadó, vol. 129(9), pages 5373-5402, September.
    4. Francesco Paolo Appio & Luigi de Luca & Robert Morgan & Antonella Martini, 2019. "Patent portfolio diversity and firm profitability: A question of specialization or diversification?," Post-Print halshs-02292360, HAL.
    5. Michalis E. Papazoglou & Jen Nelles, 2023. "Keeping Pace with Technological Change: Insights into the Recency of Internal Knowledge Inputs," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(4), pages 3724-3740, December.
    6. Ardito, Lorenzo & Petruzzelli, Antonio Messeni & Ghisetti, Claudia, 2019. "The impact of public research on the technological development of industry in the green energy field," Technological Forecasting and Social Change, Elsevier, vol. 144(C), pages 25-35.
    7. Eckert, C. & J. Hohberger (Jan) & Franses, Ph.H.B.F., 2022. "Gaussian Copula Regression in the Presence of Thresholds," Econometric Institute Research Papers 2022-02, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    8. Messeni Petruzzelli, Antonio & Ardito, Lorenzo & Savino, Tommaso, 2018. "Maturity of knowledge inputs and innovation value: The moderating effect of firm age and size," Journal of Business Research, Elsevier, vol. 86(C), pages 190-201.
    9. Ming Li & Xiangdong Chen & Gupeng Zhang, 2017. "How does firm size affect technology licensing? Empirical evidence from China," Scientometrics, Springer;Akadémiai Kiadó, vol. 112(3), pages 1249-1269, September.
    10. Edward Levitas & M. Ann McFadyen, 2020. "External funding and emergent technology inputs," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 9(5), pages 01-12, September.
    11. Trkman, Peter, 2010. "The critical success factors of business process management," International Journal of Information Management, Elsevier, vol. 30(2), pages 125-134.
    12. Seyb, Stella K., 2022. "Red flags and rave reviews: Explaining too-good-to-be-true crowdfunding campaigns," Business Horizons, Elsevier, vol. 65(1), pages 69-78.
    13. Fábio De Oliveira Paula & Jorge Ferreira Da Silva, 2019. "The Role Of The Appropriability Mechanisms For The Innovative Success Of Portuguese Small And Medium Enterprises," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 23(04), pages 1-23, May.
    14. Francesco Chirico & Giuseppe Criaco & Massimo Baù & Lucia Naldi & Luis R. Gomez-Mejia & Josip Kotlar, 2020. "To patent or not to patent: That is the question. Intellectual property protection in family firms," Entrepreneurship Theory and Practice, , vol. 44(2), pages 339-367, March.
    15. K. D. Joshi & Lei Chi & Avimanyu Datta & Shu Han, 2010. "Changing the Competitive Landscape: Continuous Innovation Through IT-Enabled Knowledge Capabilities," Information Systems Research, INFORMS, vol. 21(3), pages 472-495, September.

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