Balancing patent portfolios and R&D efforts: examining firm performance

Abstract

PurposeThis study aims to ascertain whether technological diversification (TD) enhances firm performance and explores the effect of patent portfolio balancing (PPB) on firm financial performance and the moderating role of research and development (R&D) intensity.Design/methodology/approachThis study empirically investigates a panel dataset based on 296 information and communications technology (ICT) small and medium-sized enterprises (SMEs) over 5 years, using a fixed-effects panel regression with time-lagged and moderating effects. Data are collected from a government survey and a firm and patent database.FindingsThe relationship between PPB and return on assets (ROA) is negative, indicating that TD in SMEs adversely affects firm performance. R&D intensity positively moderates the relationship between PPB and ROA, implying that follow-up R&D after creating new patents could weaken the negative relationship between TD and firm performance. This moderating effect only occurs when R&D intensity is sufficiently high, suggesting that high R&D firms could be more successful at diversification.Practical implicationsAs TD consumes many resources, managers should set the optimal level of diversification and recognise the need for follow-up R&D for successful diversification.Originality/valueThis study conceptualises a unique theoretical framework for the PPB of ICT SMEs, revealing the moderating role of R&D intensity in changing the negative influence of PPB on firm performance.