Impact of Competition on the Relationship Between Relative Performance and Motivation to Develop Radical Technology

Two types of technology development are conducted by firms: radical and incremental. While many studies have focused on the circumstances when firms actively conduct high-risk radical technology development, they have demonstrated that the more a firm’s technological performance rises above or falls below its aspiration, the more reluctant it is to try radical technology development. Moreover, some studies have suggested that the propensity of a firm’s technology development varies with the intensity of competition. Given these findings, our study aimed to clarify the following: 1) the impact of the difference between a firm’s technological performance and its aspiration on the firm’s effort to radical technology development; 2) how this impact varies with the intensity of competition, using patent data. Firms’ efforts to radical technology development were measured by the number of radical patents extracted using patent citation relationships. The performance and aspiration of firms were measured by the number of forward citations of their patents. This study revealed that the negative impact that occurs when performance falls below aspiration was stronger in more competitive technology areas.