The Effect of Innovative Activity on Firm Performance: The Experience of Taiwan

Asokan Anandarajan, Chen Lung Chin, Hsin Yi Chi, Picheng Lee

Research output: Chapter in Book/Report/Conference proceedingChapter

4 Scopus citations

Abstract

Firm performance is, among other factors, a function of tangible and intangible assets that the firm possesses and utilizes to maximize value. While research has examined the impact of advertising and R&D on firm performance, in this chapter we, in addition, examine the extent of innovation as measured by patents granted on firm performance. Our findings indicate that overall, innovative activity as measured by number of patents granted, significantly influences firm performance as measured by Tobin's q. Hence patenting activity is value relevant to investors. Further, this relationship is more pronounced when the patents are granted in the United States. We conclude that markets tend to give greater credence to innovative activity when patents are granted to foreign firms by the U.S. Patenting Office. Finally, the stage of the product in the industry chain moderates the influence of patenting activity on firm performance. When patents are granted in the design stage the impact on firm performance is stronger relative to when patents are granted in the manufacturing and packaging and testing stages. The evidence indicates that patents by companies in the manufacturing end of the chain have a more pronounced impact on firm performance relative to patents granted in the packaging and testing stage.

Original languageEnglish (US)
Title of host publicationAdvances in Accounting
EditorsPhilip Reckers, Govind Iyer, Salvador Carmona, Eric Johnson, Loren Margheim, Richard Morton
Pages1-30
Number of pages30
DOIs
StatePublished - 2007

Publication series

NameAdvances in Accounting
Volume23
ISSN (Print)0882-6110

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance

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