Financial implications of technology-class code popularity and usage among industry competitors

Novel measures of technology popularity and usage were constructed and tested to assess the returns available from patenting within mainstream versus more-exotic technology-classification codes (or pairs of codes). Popularity suggested the frequency density with which technological codes (pairs) were most frequently found among competitors’ patents. Usage measured whether firms dominated particular technology codes (or pairs of codes) relative to competitors. Firms’ financial performance varied according to whether firms followed “me-too” technological leads or patented within less-commonplace technologies. Results suggested that firms should exercise caution when spending heavily in pursuing research leads within crowded technological streams. Results also implied that some firms successfully countered popular trends in pursuing technological leads within declining arenas when industry interest went elsewhere. Since evolutionary waves of technology affected the profitability potential of industries, we used longitudinal tests within three industries that developed from various structural stages of development to illustrate the effects of demand growth and establishment of technological standards upon the patenting strategies suggested by popularity and usage measures.