When to commit to a prior technological entry: A multi-theoretical view on follow-up patenting

In response to calls for more empirical inquiries into investment decisions under uncertainty, this paper departs from the knowledge-based view (KBV) of the follow-up patenting actions to its boundary conditions on the happening of the persistent patenting through the lenses of transaction cost theory and real option reasoning. The former addresses specific assets built by the first patent entry, which makes the focal firm's persistent commitment subject to technological uncertainty; the latter considers firm competence an effective vehicle for reducing the learning costs of follow-up investments. A Cox regression model with the patent data from 15 global companies in the bearings industry during 1990–2004 confirms not only the influences of a firm's knowledge profile on its propensity to follow up on patenting in a newly entered domain but also the moderating role of competitive intensity and firm learning speed. The findings identify the theoretical sensitivity of the knowledge-based view to external and internal contexts and shed light on the dynamic nature of innovation persistence particularly when firms are subject to technological uncertainty and varying levels of firm competence.