Indicators of firm technological capability: Validity and performance implications

Academic researchers and practicing managers in the area of management of technology are faced with a difficult challenge in attempting to measure technological capability at the firm level. A number of different indicators of firm technological capability (FTC) have been proposed and used, however, they have not been systematically evaluated across different industry settings. These indicators include R&D expenditures, patent statistics, and statistics on new product introductions. In this study, we discuss some of the relative advantages and disadvantages of these indicators and we assess their validity in the chemical, electronics, and pharmaceutical industries. We find that measures of the scale of FTC are relatively consistent across industries, but that measures of the quality of FTC are somewhat less consistent. Finally, we find limited evidence that aspects of FTC quality are related to firm performance.