Abstract
We explored the balance between societal benefits that negatively affect firms’ financial performance by eroding their competitive advantage and positive effects that enhanced their reputations as technological leaders to study the effects of forward citations upon firms’ financial performance. Results suggest that the potentially negative effects of receiving forward citations that diffused internally-developed knowledge through users’ subsequent inventions is sometimes offset by potential increases in the reputational effects enjoyed by competitors that persistently produce blockbuster patents (as well as by inventions that prove to be highly basic or “gateway” in their impact upon subsequent technology streams). This positive effect is not universal for all firms as the number of highly cited patents that benefit firms’ abilities to realize higher returns on sales is limited by the speed with which diffusion of knowledge embedded within patented inventions occurs.
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