Technological knowledge breadth and depth: performance impacts

Purpose The purpose of this paper is to explore how the depth and breadth of firms' technological knowledge affect their performance. Design/methodology/approach An empirical investigation of a sample of US manufacturing firms was conducted. The main independent variables were measured using firms' patent data. Three hypotheses based on theory were developed and tested using multivariate regressions. To increase reliability, alternative industry and firm explanators of performance are controlled. Findings The depth and breadth of technological knowledge, rather than total stock, are significantly better at predicting three measures of firm performance that was used in the study – return on invested capital, sales growth, and Tobin's q. The two knowledge dimensions exhibited either independent non‐linear effects or mutually reinforcing effects on each of the three performance measures. Research limitations/implications The study is limited to a fine‐grained analysis of effects of technological knowledge. It does not take into account the facilitating role of marketing and administrative knowledge. Practical implications Corporate managers need to measure the depth and breadth of their technological knowledge stocks and include them in their planning models. Extreme combinations of depth and breadth need to be corrected and brought into balance. Originality/value The paper represents one of the few studies to disaggregate a firm's total stock of technological knowledge into its depth and breadth components.