innovation, inter-firm agreements, firm growth, market value

This paper estimates the effects of the 'knowledge capital' on the performance of the chemical and electronics 'Fortune 500' North American, European and Japanese firms between 1993-1997. The novelty of this paper is that, apart from the R&D and patent stocks of the firms, we measure the knowledge capital of the firms by also including a measure of the value of the stock of their external technological linkages (licenses, technological alliances and joint-ventures, and minority participations in technology-based smaller firms). We estimated the effects of the growth of the stocks of R&D, patents, and technological linkages on firm sales growth, profit rates and cash flow, controlling for the growth of physical inputs (capital and labour). We also analysed the effects of our three knowledge assets on the market value of the firm. Both traditional total factor productivity analyses, and our estimation of the effects of these assets on market value, suggest that external technological linkages contribute to firm's performance beyond the effects of R&D and patents. The comparable results obtained using these two different approaches provide a fairly solid evidence of the importance of such technological linkages.