The impact of technological capability on firm performance in Taiwan's electronics industry

Abstract

Although a number of studies have emphasized the importance of technological capability to competitive advantage, the empirical examination of this area has thus far been somewhat scarce, particularly at firm level. This paper therefore aims to examine the impact of technological capability on firm performance. Inasmuch as the electronics industry is expected to place significant emphasis on the absorption and application of technological knowledge from scientific research, this industry is taken as the analytical sample. In contrast to prior studies in this area, this paper attempts to determine the dynamic and nonlinear characteristics of the accumulation of technological capability by firms through ‘longitudinal operationalization,’ with the technological capability of a firm being measured from a perspective of stock rather than flow. Based upon a panel dataset, the estimations of our model, derived from the Cobb–Douglas production function, reveal that firm technological capability has a significant effect on productivity growth, and that the impact of technological capability seems to be greater than that of other conventional factors. These findings demonstrate that technological capability is an important determinant in the promotion of competitive advantage for Taiwan's electronics firms.