IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v10y2018i10p3373-d171177.html
   My bibliography  Save this article

Fabless Semiconductor Firms’ Financial Performance Determinant Factors: Product Platform Efficiency and Technological Capability

Author

Listed:
  • Jun Hong Park

    (Graduate School of Management of Technology, Korea University, 145, Anam-ro, Seongbuk-gu, Seoul 02841, Korea)

  • Sang Ho Kook

    (Korea Electronics Technology Institute, 25, Saenari-ro, Bundang-gu, Seongnam-si 13509, Korea)

  • Hyeonu Im

    (Department of Industrial Management Engineering, Korea University, 145, Anam-ro, Seongbuk-gu, Seoul 02841, Korea)

  • Soomin Eum

    (Department of Industrial Management Engineering, Korea University, 145, Anam-ro, Seongbuk-gu, Seoul 02841, Korea)

  • Chulung Lee

    (Division of Industrial Management Engineering, Korea University, 145, Anam-ro, Seongbuk-gu, Seoul 02841, Korea)

Abstract

The semiconductor industry is experiencing a rapid change since new markets and new technologies have emerged to give insights to product innovation. The semiconductor industry is now specializing into the integrated device manufacturer (IDM), fabless, and foundry sectors. We investigated the determinant factors that affect the financial performance of firms in the fabless sector, which is the most technology-intensive and product-oriented sector among the three sectors. The correlation among technological capability, product platform, and financial performance is analyzed by structural equation modeling. The data includes 17,256 patents from 2005 to 2014 and financial data from 2012 to 2016 from 57 firms that run businesses in the fabless sector. Specifically, technological capability includes technological assets, technology breadth, and technology depth. New product development occurs by applying product platform efficiency. Financial performance includes growth and profitability. The results show that advancing product platform efficiency brings positive effects to financial performance. Also, increasing technological depth and technological assets not only improve product platform efficiency, but also bring positive effects to financial performance. In addition, technological depth affected growth positively, and technological breadth affected profitability positively. The results show the direction that new product development strategy needs to take.

Suggested Citation

  • Jun Hong Park & Sang Ho Kook & Hyeonu Im & Soomin Eum & Chulung Lee, 2018. "Fabless Semiconductor Firms’ Financial Performance Determinant Factors: Product Platform Efficiency and Technological Capability," Sustainability, MDPI, vol. 10(10), pages 1-22, September.
    • Handle: RePEc:gam:jsusta:v:10:y:2018:i:10:p:3373-:d:171177
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/10/10/3373/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/10/10/3373/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ivo Welch & Amit Goyal, 2008. "A Comprehensive Look at The Empirical Performance of Equity Premium Prediction," The Review of Financial Studies, Society for Financial Studies, vol. 21(4), pages 1455-1508, July.
    2. Prencipe, Andrea, 2000. "Breadth and depth of technological capabilities in CoPS: the case of the aircraft engine control system," Research Policy, Elsevier, vol. 29(7-8), pages 895-911, August.
    3. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87, World Scientific Publishing Co. Pte. Ltd..
    4. Grimaldi, Michele & Cricelli, Livio & Di Giovanni, Martina & Rogo, Francesco, 2015. "The patent portfolio value analysis: A new framework to leverage patent information for strategic technology planning," Technological Forecasting and Social Change, Elsevier, vol. 94(C), pages 286-302.
    5. Sang Ho Kook & Ki Hong Kim & Chulung Lee, 2017. "Dynamic Technological Diversification and Its Impact on Firms’ Performance: An Empirical Analysis of Korean IT Firms," Sustainability, MDPI, vol. 9(7), pages 1-16, July.
    6. Kathleen M. Eisenhardt & Jeffrey A. Martin, 2000. "Dynamic capabilities: what are they?," Strategic Management Journal, Wiley Blackwell, vol. 21(10‐11), pages 1105-1121, October.
    7. Jacob Boudoukh & Roni Michaely & Matthew Richardson & Michael R. Roberts, 2007. "On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing," Journal of Finance, American Finance Association, vol. 62(2), pages 877-915, April.
    8. Namchul Shin & Kenneth L. Kraemer & Jason Dedrick, 2017. "R&D and firm performance in the semiconductor industry," Industry and Innovation, Taylor & Francis Journals, vol. 24(3), pages 280-297, April.
    9. Hee‐Jae Cho & Vladimir Pucik, 2005. "Relationship between innovativeness, quality, growth, profitability, and market value," Strategic Management Journal, Wiley Blackwell, vol. 26(6), pages 555-575, June.
    10. Chunjuan Luan & Haiyan Hou & Yongtao Wang & Xianwen Wang, 2014. "Are significant inventions more diversified?," Scientometrics, Springer;Akadémiai Kiadó, vol. 100(2), pages 459-470, August.
    11. Jeffrey G. Covin & Dennis P. Slevin, 1989. "Strategic management of small firms in hostile and benign environments," Strategic Management Journal, Wiley Blackwell, vol. 10(1), pages 75-87, January.
    12. Giacomo Vaccario & Mario V. Tomasello & Claudio J. Tessone & Frank Schweitzer, 2018. "Quantifying knowledge exchange in R&D networks: a data-driven model," Journal of Evolutionary Economics, Springer, vol. 28(3), pages 461-493, August.
    13. Chang, Ke-Chiun & Chen, Dar-Zen & Huang, Mu-Hsuan, 2012. "The relationships between the patent performance and corporation performance," Journal of Informetrics, Elsevier, vol. 6(1), pages 131-139.
    14. Yi-Chia Chiu & Hsien-Che Lai & Yi-Ching Liaw & Tai-Yu Lee, 2010. "Technological scope: diversified or specialized," Scientometrics, Springer;Akadémiai Kiadó, vol. 82(1), pages 37-58, January.
    15. Tom Cottrell & Barrie R. Nault, 2004. "Product variety and firm survival in the microcomputer software industry," Strategic Management Journal, Wiley Blackwell, vol. 25(10), pages 1005-1025, October.
    16. Michael W. Browne & Robert Cudeck, 1992. "Alternative Ways of Assessing Model Fit," Sociological Methods & Research, , vol. 21(2), pages 230-258, November.
    17. Kenneth A. Bollen, 1989. "A New Incremental Fit Index for General Structural Equation Models," Sociological Methods & Research, , vol. 17(3), pages 303-316, February.
    18. Lee, Sanghoon, 2014. "The relationship between growth and profit: evidence from firm-level panel data," Structural Change and Economic Dynamics, Elsevier, vol. 28(C), pages 1-11.
    19. Zahra, Shaker A., 1996. "Technology strategy and financial performance: Examining the moderating role of the firm's competitive environment," Journal of Business Venturing, Elsevier, vol. 11(3), pages 189-219, May.
    20. Scott F. Turner & Will Mitchell & Richard A. Bettis, 2010. "Responding to Rivals and Complements: How Market Concentration Shapes Generational Product Innovation Strategy," Organization Science, INFORMS, vol. 21(4), pages 854-872, August.
    21. Murphy, Gregory B. & Trailer, Jeff W. & Hill, Robert C., 1996. "Measuring performance in entrepreneurship research," Journal of Business Research, Elsevier, vol. 36(1), pages 15-23, May.
    22. Chen, Yi-Min & Yang, De-Hsin & Lin, Feng-Jyh, 2013. "Does technological diversification matter to firm performance? The moderating role of organizational slack," Journal of Business Research, Elsevier, vol. 66(10), pages 1970-1975.
    23. Shoko Haneda & Hiroyuki Odagiri, 1998. "Appropriation Of Returns From Technological Assets And The Values Of Patents And R&D In Japanese High-Tech Firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 7(4), pages 303-321.
    24. Ke-Chiun Chang & Wei Zhou & Sifei Zhang & Chien-Chung Yuan, 2015. "Threshold effects of the patent H-index in the relationship between patent citations and market value," Journal of the Association for Information Science & Technology, Association for Information Science & Technology, vol. 66(12), pages 2697-2703, December.
    25. Chen-Lung Chin & Picheng Lee & Hsin-Yi Chi & Asokan Anandarajan, 2006. "Patent Citation, R&D Spillover, and Tobin's Q: Evidence from Taiwan Semiconductor Industry," Review of Quantitative Finance and Accounting, Springer, vol. 26(1), pages 67-84, February.
    26. Frank T. Rothaermel & David L. Deeds, 2004. "Exploration and exploitation alliances in biotechnology: a system of new product development," Strategic Management Journal, Wiley Blackwell, vol. 25(3), pages 201-221, March.
    27. Kyläheiko, Kalevi & Jantunen, Ari & Puumalainen, Kaisu & Saarenketo, Sami & Tuppura, Anni, 2011. "Innovation and internationalization as growth strategies: The role of technological capabilities and appropriability," International Business Review, Elsevier, vol. 20(5), pages 508-520, October.
    28. Nicky J. Welton & Howard H. Z. Thom, 2015. "Value of Information," Medical Decision Making, , vol. 35(5), pages 564-566, July.
    29. Narin, Francis & Noma, Elliot & Perry, Ross, 1987. "Patents as indicators of corporate technological strength," Research Policy, Elsevier, vol. 16(2-4), pages 143-155, August.
    30. Yu-Shan Chen & Ke-Chiun Chang, 2012. "Using the entropy-based patent measure to explore the influences of related and unrelated technological diversification upon technological competences and firm performance," Scientometrics, Springer;Akadémiai Kiadó, vol. 90(3), pages 825-841, March.
    31. Krishna Palepu, 1985. "Diversification strategy, profit performance and the entropy measure," Strategic Management Journal, Wiley Blackwell, vol. 6(3), pages 239-255, July.
    32. Paul Steffens & Per Davidsson & Jason Fitzsimmons, 2009. "Performance Configurations over Time: Implications for Growth– and Profit–Oriented Strategies," Entrepreneurship Theory and Practice, , vol. 33(1), pages 125-148, January.
    33. Jean O. Lanjouw & Mark Schankerman, 2004. "Patent Quality and Research Productivity: Measuring Innovation with Multiple Indicators," Economic Journal, Royal Economic Society, vol. 114(495), pages 441-465, April.
    34. William C. Bogner & Pamela S. Barr, 2000. "Making Sense in Hypercompetitive Environments: A Cognitive Explanation for the Persistence of High Velocity Competition," Organization Science, INFORMS, vol. 11(2), pages 212-226, April.
    35. Kim, Jungho & Lee, Chang-Yang & Cho, Yunok, 2016. "Technological diversification, core-technology competence, and firm growth," Research Policy, Elsevier, vol. 45(1), pages 113-124.
    36. Fischer, Timo & Leidinger, Jan, 2014. "Testing patent value indicators on directly observed patent value—An empirical analysis of Ocean Tomo patent auctions," Research Policy, Elsevier, vol. 43(3), pages 519-529.
    37. Ibrahim El-Sayed Ebaid, 2009. "The impact of capital-structure choice on firm performance: empirical evidence from Egypt," Journal of Risk Finance, Emerald Group Publishing, vol. 10(5), pages 477-487, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yoonkyo Cho, 2020. "The Effects of Knowledge Assets and Path Dependence in Innovations on Firm Value in the Korean Semiconductor Industry," Sustainability, MDPI, vol. 12(6), pages 1-13, March.
    2. Ying Li & Yung-Ho Chiu & Tai-Yu Lin & Tzu-Han Chang, 2020. "Pre-Evaluating the Technical Efficiency Gains from Potential Mergers and Acquisitions in the IC Design Industry," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 19(02), pages 525-559, April.
    3. Haili Zhang & Yufan Wang & Michael Song, 2019. "Does Competitive Intensity Moderate the Relationships between Sustainable Capabilities and Sustainable Organizational Performance in New Ventures?," Sustainability, MDPI, vol. 12(1), pages 1-18, December.
    4. Zhuquan Wang & Memon Rafait Mahmood & Hafeez Ullah & Imran Hanif & Qaiser Abbas & Muhammad Mohsin, 2020. "Multidimensional Perspective of Firms’ IT Capability Between Digital Business Strategy and Firms’ Efficiency: A Case of Chinese SMEs," SAGE Open, , vol. 10(4), pages 21582440209, December.
    5. Jun Hong Park & Hyunseog Chung & Ki Hong Kim & Jin Ju Kim & Chulung Lee, 2021. "The Impact of Technological Capability on Financial Performance in the Semiconductor Industry," Sustainability, MDPI, vol. 13(2), pages 1-20, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jun Hong Park & Hyunseog Chung & Ki Hong Kim & Jin Ju Kim & Chulung Lee, 2021. "The Impact of Technological Capability on Financial Performance in the Semiconductor Industry," Sustainability, MDPI, vol. 13(2), pages 1-20, January.
    2. Sang Ho Kook & Ki Hong Kim & Chulung Lee, 2017. "Dynamic Technological Diversification and Its Impact on Firms’ Performance: An Empirical Analysis of Korean IT Firms," Sustainability, MDPI, vol. 9(7), pages 1-16, July.
    3. Seh-Hyun Yoo & Chang-Yang Lee, 2023. "Technological diversification, technology portfolio properties, and R&D productivity," The Journal of Technology Transfer, Springer, vol. 48(6), pages 2074-2105, December.
    4. Jang, Hyun Jin & Woo, Han-Gyun & Lee, Changyong, 2017. "Hawkes process-based technology impact analysis," Journal of Informetrics, Elsevier, vol. 11(2), pages 511-529.
    5. Rakesh B. Sambharya & Jooh Lee, 2014. "Renewing Dynamic Capabilities Globally: An Empirical Study of the World’s Largest MNCs," Management International Review, Springer, vol. 54(2), pages 137-169, April.
    6. Patrick Kreiser & Louis Marino & Donald Kuratko & K. Weaver, 2013. "Disaggregating entrepreneurial orientation: the non-linear impact of innovativeness, proactiveness and risk-taking on SME performance," Small Business Economics, Springer, vol. 40(2), pages 273-291, February.
    7. Leila Tahmooresnejad & Catherine Beaudry, 2018. "Do patents of academic funded researchers enjoy a longer life? A study of patent renewal decisions," PLOS ONE, Public Library of Science, vol. 13(8), pages 1-22, August.
    8. Moaniba, Igam M. & Lee, Pei-Chun & Su, Hsin-Ning, 2020. "How does external knowledge sourcing enhance product development? Evidence from drug commercialization," Technology in Society, Elsevier, vol. 63(C).
    9. Su, Hsin-Ning & Moaniba, Igam M., 2020. "Does geographic distance to partners affect firm R&D spending? The moderating roles of individuals, firms, and countries," Journal of Business Research, Elsevier, vol. 106(C), pages 12-23.
    10. 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.
    11. Leila Tahmooresnejad & Catherine Beaudry, 2019. "Capturing the economic value of triadic patents," Scientometrics, Springer;Akadémiai Kiadó, vol. 118(1), pages 127-157, January.
    12. Huang, Kenneth Guang-Lih & Huang, Can & Shen, Huijun & Mao, Hao, 2021. "Assessing the value of China's patented inventions," Technological Forecasting and Social Change, Elsevier, vol. 170(C).
    13. Jaideep Anand & Raffaele Oriani & Roberto S. Vassolo, 2010. "Alliance Activity as a Dynamic Capability in the Face of a Discontinuous Technological Change," Organization Science, INFORMS, vol. 21(6), pages 1213-1232, December.
    14. Bo Kyeong Lee & So Young Sohn, 2017. "Exploring the effect of dual use on the value of military technology patents based on the renewal decision," Scientometrics, Springer;Akadémiai Kiadó, vol. 112(3), pages 1203-1227, September.
    15. Prange, Christiane & Verdier, Sylvie, 2011. "Dynamic capabilities, internationalization processes and performance," Journal of World Business, Elsevier, vol. 46(1), pages 126-133, January.
    16. Maria Chiara Di Guardo & Kathryn Rudie Harrigan & Elona Marku, 2019. "M&A and diversification strategies: what effect on quality of inventive activity?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 23(3), pages 669-692, September.
    17. Neuhäusler , Peter & Schubert, Torben & Frietsch , Rainer & Blind , Knut, 2015. "Managing Portfolio Risk in Strategic Technology Management: Evidence from a Panel Data Set of the World’s Largest R&D Performers," Papers in Innovation Studies 2015/41, Lund University, CIRCLE - Centre for Innovation Research.
    18. Aksoy, Arman Y. & Pulizzotto, Davide & Beaudry, Catherine, 2022. "University-Industry partnerships in the smart specialisation era," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    19. Frank T. Rothaermel & Maria Tereza Alexandre, 2009. "Ambidexterity in Technology Sourcing: The Moderating Role of Absorptive Capacity," Organization Science, INFORMS, vol. 20(4), pages 759-780, August.
    20. Ralf Meinhardt & Sebastian Junge & Martin Weiss, 2018. "The organizational environment with its measures, antecedents, and consequences: a review and research agenda," Management Review Quarterly, Springer, vol. 68(2), pages 195-235, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:10:y:2018:i:10:p:3373-:d:171177. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.