Resources as dual sources of advantage: Implications for valuing entrepreneurial‐firm patents

TLDR

Patents act as legal safeguards in product markets and as quality signals that can improve access and terms of trade in factor input markets, raising questions about how resources generate competitive advantage. The study investigates how entrepreneurial‑firm patents can provide distinct competitive advantages across product and factor markets. The authors analyze entrepreneurial‑firm patents as a single resource that can simultaneously offer product‑market protection and factor‑market advantages. Evidence from 370 venture‑backed semiconductor start‑ups shows that patents deliver dual advantages—enhanced factor‑market access and terms of trade—beyond product‑market protection, underscoring their value for resource‑based theory. © 2013 John Wiley & Sons, Ltd.

Abstract

Why and how do resources provide sources of competitive advantage? This study sheds new light on this central question of resource‐based theory by allowing a single resource—entrepreneurial‐firm patents—to play distinctive roles in different competitive arenas. As rights to exclude others, patents serve a well‐known role as legal safeguards in product markets. As quality signals, patents also could improve access and the terms of trade in factor input markets. Based on the financing activities of 370 venture‐backed semiconductor start‐ups, we provide new evidence that patents confer dual advantages in strategic factor markets, improved access and terms of trade, above and beyond their added product‐market protection. The study has important implications for empirical tests of resource‐based theory and the measurement of resource value . Copyright © 2013 John Wiley & Sons, Ltd.