An exploration of technology intensity measures

Technological activity is defined to mean the approaches firms use to translate research and development (R&D) efforts into advances in their respective product and process technologies. These R&D efforts, then, have the potential to provide competitive advantage resulting in improved performance. Several studies conducted in the past have not established any definite relationship between R&D investment (measured in terms of R&D expenditure) and firm performance. One possible reason could be that R&D expenditure per se does not contribute to a firm's success. However, if one could measure the accumulation of knowledge and technological strength resulting from R&D efforts then one might find a determinant of firm performance. This is the connecting link between R&D effort and firm performance. The authors first review a variety of papers which report on studies which have attempted to show the linkage between technological activity and technological intensity with firm performance. They then follow this up with a summary of two studies by the authors which introduce technological intensity measures based on patent activity and patent attributes. They then conclude with a review of a variety of firm performance measures based on both accounting, market, and sales data.