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Technology Portfolio and Market Value

Discussion Papers 780, 26 S.

Jens Schmidt-Ehmcke, Petra Zloczysti

2008. Apr.

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This paper discusses the impact of a firm's technology portfolio on its market value. Two concepts are used to characterize a firm's portfolio: the number of technological fields and the degree of relatedness within the portfolio characterized by the amount of joint occurrences of patents in technological fields. Based on a theoretical framework using an expanded Tobin's q approach, it presents evidence for a negative influence of portfolio size on the market value caused by a diminishing potential to make use of economies of scale. This discount can be counterbalanced when the relevant fields share a common technological base which is measured by the degree of technological relatedness.

JEL-Classification: L25;O31;O32
Keywords: technological portfolio, relatedness, patent statistics, tobin's q, economies of scope
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