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Sustainability of patent-based competitive advantage in the U.S. communications services industry

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Abstract

Patents have long been assumed to provide firms with competitive advantage, but longitudinal results suggest that some types of patent content provide more enduring advantage than others do. The duration of advantage appeared to wane with time in the highly-dynamic U.S. communications-services industry during a period when technological changes occurred rapidly within it (1998–2012). Results suggest patents integrating technology streams that were different from the technologies of focal-patents’ grants contributed more to sustaining firms’ profit margins during this period than did focal patents that exploited extant technological knowledge. We found that firms who continually pushed their organization’s knowledge envelope outward to incorporate more unknown technologies sustained higher profit margins for a longer duration of time than did firms whose patented inventions were predominantly incremental—even within difficult settings where competition grew so intense that firms’ average operating margins were deteriorating.

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Notes

  1. Ironically, Lucent Technologies filed both patents: the one that dramatically increased demand for communications capacity as well as the multiplexing discovery that increased transmission capacity even more dramatically.

  2. Consumer-based tracking of use of communications services is available from http://www.OECD.org/internet/broadband/oecdkeyindicators.htm.

  3. Results did not change when non-linear terms were tested for R&Dx. Log(Assets)x was used to reduce the effects of sample heteroskadasticity.

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Acknowledgments

Research assistance was provided by Jesse Garrett, Donggi Ahn, Hongyu Chen, Elona Marku-Gjoka, the Patent Office of the Sardegna Ricerche Scientific Park and Thomson Reuters.

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Authors and Affiliations

  1. Henry R. Kravis Professor of Business Leadership, Columbia University, 701 Uris Hall, New York, NY, 10027, USA

    Kathryn Rudie Harrigan

  2. Department of Economics and Business, University of Cagliari, Viale Fra Ignazio 17, 09125, Cagliari, Italy

    Maria Chiara DiGuardo

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  1. Kathryn Rudie Harrigan
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Correspondence to Kathryn Rudie Harrigan.

Appendices

Appendix 1

See Table 4.

Table 4 Means for patent scores
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Appendix 2

See Table 5.

Table 5 Correlations for patent scores
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Harrigan, K.R., DiGuardo, M.C. Sustainability of patent-based competitive advantage in the U.S. communications services industry. J Technol Transf 42, 1334–1361 (2017). https://doi.org/10.1007/s10961-016-9515-2

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