SMEs inventive performance and profitability in the markets for technology. (July 2015)

• Record Type: Journal Article
• Authors: Padula, Giovanna; Novelli, Elena; Conti, Raffaele
• Is Part Of: Technovation. Volume 41/42(2015)
• Page Start: 38
• Page End: 50
• Publication Date: 2015-07
• Subjects: Markets for technologies -- Vertical boundaries -- Firm inventive performance -- Firm profitability -- Small medium enterprises; Technological innovations -- Periodicals; Industrial management -- Periodicals; Innovations -- Périodiques; Gestion d'entreprise -- Périodiques; Electronic journals; 658.57
• DOI: 10.1016/j.technovation.2015.01.002
• Languages: English
• ISSNs: 0166-4972

Abstract

Abstract: This paper studies the inventive performance and profitability of small and medium sized firms (SMEs) that are "technology specialists" compared to the inventive performance and profitability of SMEs that are instead vertically-integrated. In this paper perspective, "technology specialists" are firms that specialize upstream in generating inventions and trade those inventions in disembodied form with other firms, usually through licensing agreements. Instead, vertically-integrated firms are those firms that both generate inventions and commercialize products incorporating those inventions. We argue that technology specialists achieve a higher inventive performance than vertically-integrated firms, since they can accumulate deeper and broader inventive experience, whilst keeping a more flexible organizational structure. These firms display a lower profitability though, due to the imperfections inherent in invention market transactions and the lower bargaining power caused by the lack of commercialization assets. The theoretical framework is tested through a cross-industry investigation on a sample of European SMEs. Implications for the viability of being a technology specialist as a strategy and for the development of markets for technology are discussed. Highlights: This paper studies the inventive performance and profitability of technology specialists SMEs compared to vertically integrated SMEs. The context is provided by European SMEs operating in a wide variety of industries. Technology specialists SMEs have higher inventive performance than vertically-integrated SMEs. Technology specialists SMEs have lower profitability than vertically-integrated SMEs.