The Relationship between Innovation and Market Share : Evidence from the Global LCD Industry

We investigate the impact of technological capability on firm market share using technology investment data in the global thin-film-transistor liquid-crystal-display panel industry from 1999 to 2007. The Arellano–Bond estimation of the dynamic panel model indicates that prior technological capability is positively correlated with current market share. The magnitude of this effect appears economically substantial: an improvement of technological capability by one standard deviation implied a permanent increase of 2.6 percent-point in quarterly market share, a return tantamount to $470 million in 2007 sales. The Granger test reveals that technological capability helps to predict future market share, but that the inverse is not true