Rare is Beautiful? The Choice of Rare R&D Subjects and Technological Value Creation

Abstract

Conceptual and empirical conflation between resource characteristics and resource-generated economic values has remained a weakness in the resource-based view literature. We address this issue by examining firms’ strategic choice of rare R&D subjects evaluated at the time of choice and by substantiating the micro-mechanisms through which rare resources develop into a critical source of competitive advantage. In particular, we conceptualize value creation and its sustainability at the resource level, clarifying the link between resource acquisition and rent generation. We build our theory exploiting the fundamental tension in the strategic factor market, where firms obtain resources to complete R&D projects and also strive to isolate their R&D output from potential competitors. Our core argument is that the degree of rareness of the R&D subject a firm chooses for resource development has a negative and nonlinear relationship with the value of the resulting resource and the sustainability of that value. For the sustainability of created value, we consider both dimensions of temporal duration and diffusion span. An analysis utilizing the topic modeling method of over 4,000 U.S. nanotechnology patents provides strong support for our theory. We claim important contributions to the resource- based view literature.