The Contingent Value of Inward Technology Licensing on the Performance of Small High-Technology Firms

As competition intensifies and the pace of technological change accelerates, many firms often adopt inward technology licensing (ITL) to improve performance. However, previous studies investigating the effect of ITL on firm performance have not focused their samples on small high-technology firms. Furthermore, whereas past research has emphasized the moderating effect of internal research and development (R&D) on the use of external technology, relatively little research has examined such an effect. This study examines the effect of ITL on the performance of small high-technology firms, exploring the moderating role of internal R&D on the relationship between ITL and firm performance. In total, 138 small electronics manufacturing firms in Taiwan were sampled during the period of 1998 to 2005. Using a two-way fixed effects model, the analyses suggest that whether ITL has a positive effect on firm performance depends on the level of sustained internal R&D investment. This finding reveals why firms may vary in their ability to improve performance through adopting ITL.