Description
Based on the framework of profit from innovation, the factors affecting patent commercialization performance
include innovation appropriability and firms' complementary assets. The framework of dynamic
capabilities illustrates that appropriability and complementary assets are seizing capabilities
underlying firms' dynamic capabilities, and market sensing capabilities are one type of sensing capabilities.
This study argues that not only seizing capabilities but also interactions between seizing and
market sensing capabilities affect patent commercialization performance. Based on the surveyed data
from Taiwanese firms owning biotechnological patents, this study finds that complementary assets and
patented innovation appropriability significantly positively affect patent commercialization performance.
Market sensing capabilities significantly positively moderate the relationship between complementary
assets and patent commercialization performance, whereas their moderating effect on appropriability
and commercialization performance is not significant. Finally, this study provides suggestions for patent
management practitioners.
Complementary assets, appropriability, and patent commercialization: Market
sensing capability as a moderator
Jie-Heng Lin
a
, Ming-Yeu Wang
b, *
a
Graduate School of Business Administration, National Taiwan University, Taipei, Taiwan
b
Department of BioBusiness Management, (Formerly known as Department of Bio-industry and Agribusiness Administration), National Chiayi University, Taiwan
a r t i c l e i n f o
Article history:
Received 17 February 2014
Accepted 22 September 2014
Available online 30 March 2015
Keywords:
Appropriability
Complementary asset
Market sensing capability
Patent commercialization
a b s t r a c t
Based on the framework of pro?t from innovation, the factors affecting patent commercialization per-
formance include innovation appropriability and ?rms' complementary assets. The framework of dy-
namic capabilities illustrates that appropriability and complementary assets are seizing capabilities
underlying ?rms' dynamic capabilities, and market sensing capabilities are one type of sensing capa-
bilities. This study argues that not only seizing capabilities but also interactions between seizing and
market sensing capabilities affect patent commercialization performance. Based on the surveyed data
from Taiwanese ?rms owning biotechnological patents, this study ?nds that complementary assets and
patented innovation appropriability signi?cantly positively affect patent commercialization performance.
Market sensing capabilities signi?cantly positively moderate the relationship between complementary
assets and patent commercialization performance, whereas their moderating effect on appropriability
and commercialization performance is not signi?cant. Finally, this study provides suggestions for patent
management practitioners.
© 2015, College of Management, National Cheng Kung University. Production and hosting by Elsevier
Taiwan LLC. All rights reserved.
1. Introduction
Commercializing patented innovations (hereinafter patents) is
an important stage of improving organizational performance. The
de?nition of patent commercialization is similar to that of
commercializing a technology (Shane, 2001; Svensson, 2007; Teece,
1986), which includes selling, transferring, or licensing out patented
technologies to existing ?rms, to establish new?rms on the basis of
patented technologies or to implement patented technologies in
patentees' products or manufacturing processes. Although the
de?nition of patent commercialization is similar to that of technol-
ogy commercialization, the costs of holding patents make
commercializing patents more critical. During the period of holding
a patent, ?rms have to pay considerable fees, such as ?lling and
maintenance fees. Moreover, maintenance fees increase during the
granted duration (Bessen, 2008). Effectively commercializing their
patents byevaluating the determinants of patent commercialization
increases returns and thereby improves ?rm performance.
Prior studies have identi?ed factors affecting the performance of
patent commercialization. These studies have typically investigated
patent-level or technology-level factors, such as patent scope,
patent age, citations, and science linkage (e.g., Dechenaux,
Goldfarb, Shane, & Thursby, 2008; Nerkar & Shane, 2007). How-
ever, products are complex artifacts that consist of different un-
derlying technologies and knowledge that interact with one
another (Peine, 2009), and creating products that address customer
needs and achieve market success requires the combination of
multiple technologies (Somaya & Teece, 2007). Because this
complexity requires investigation of ?rm-level in?uential factors,
this study focuses on the effects of ?rm-level organizational capa-
bilities by examining previous technology commercialization
studies.
Teece (1986) proposed the well-known pro?ting from innova-
tion (PFI) framework to explain how organizations can capture
pro?ts from technology commercialization. This framework uses
appropriability and complementary assets as two crucial de-
terminants. Appropriability indicates the imitability of the inno-
vation. A technology with strong appropriability is hard to imitate,
enabling innovators to monopolize the pro?ts from its
* Corresponding author. Department of BioBusiness Management, (Formerly
known as Department of Bio-industry and Agribusiness Administration), National
Chiayi University, Number 580, Sinmin Road, Chiayi City 60054, Taiwan.
E-mail address: [email protected] (M.-Y. Wang).
Peer review under responsibility of College of Management, National Cheng Kung
University.
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Asia Paci?c Management Review 20 (2015) 141e147
commercialization. Applying for patents establishes legal impedi-
ments that prevent imitating technologies. Given a ?rm's estab-
lishing of legal barriers and paying for disclosing technology
knowledge to the public, that knowledge's inherent replicability by
other ?rms further explains how patentees can capture the value
from their own innovations (Levin et al., 1987). This study extends
the concept of appropriability to ?rm-level patentees and
investigates whether the ?rm's capability to generate highly
appropriable patent knowledge can advance its patent commer-
cialization performance.
Complementary assets refer to the ?rm's assets or capabilities
[rather than technology or intellectual property (IP)] necessary for
successfully commercializing technologies, which include
manufacturing capacity, distribution channels, after-sales service,
brands, and complementary technologies (Teece, 1986). Comple-
mentary assets strongly shape ?rms' strategies and evolution paths,
potentially affecting returns on innovations.
In Teece's framework of dynamic capabilities, appropriability
and complementary assets relate to seizing decisions and capa-
bilities underlying ?rms' dynamic capability as key elements in
selecting enterprise boundaries and eventually affecting ?rm
performance (Teece, 2007). Firms require sensing capabilities to
identify opportunities and threats from their business ecosystem.
Market sensing capability is one type of sensing capabilities,
which involves the capabilities of gathering and ?ltering market
information from outside and inside the ?rm, determining its
meaning, and drawing implications for action that can reduce
commercialization process uncertainty and increase opportunities
for successful commercial innovation (Day, 1994; Teece, 2007). The
probability of an innovation's commercial success correlates
highly with the developers' understanding of customer needs
(Brown & Eisenhardt, 1995; Kahn, 2001) and top managers'
sensitivity to markets (Day, 2002). The ability to sense markets
enables ?rms to anticipate new technologies' potential, leading to
successful development activities (Teece, 2010). Therefore, on the
basis of the PFI framework, this study investigates the effects of
?rms' complementary assets and patents' appropriability on pat-
ent commercialization performance. Supplemented by the
framework of dynamic capabilities, this study further investigates
the moderating effects of market sensing capability on the rela-
tionship between seizing capabilities, speci?cally complementary
assets and appropriability, and patent commercialization
performance.
We empirically surveyed Taiwanese ?rms with biotechnolog-
ical patents granted by either the United States Patent and
Trademark Of?ce (USPTO) or Taiwan Intellectual Property Of?ce
(TIPO) 2000e2009, and applied partial least squares (PLS) struc-
tural equation modeling to analyze the effects. The results
contribute to understanding the relationships among comple-
mentary assets, appropriability, market sensing capability, and
patent commercialization performance. Finally, this study ad-
dresses the implications of dynamic capability and patent
commercialization for academia and offers suggestions to patent
management practitioners for increasing pro?ts from patent
commercialization.
2. Theoretical background and hypotheses
Firms can earn great bene?ts from patent commercialization,
which include increasing revenue and market share, maintaining
growth and competitiveness, and creating new opportunities and
new ?rms (e.g., Dechenaux et al., 2008; Shane, 2001). The present
study contributes to understanding ?rm-level in?uential factors of
patent commercialization performance based on the PFI frame-
work. The framework explains that appropriability determines the
success of technology commercialization. During the process of
patent commercialization, a ?rm may encounter uncertainties and
rivals' imitations. For an innovation, high appropriability frees the
owner from imitation by rivals, thus reducing uncertainties in
commercializing patents and providing patentees greater bargai-
ning power for successful commercialization (Dechenaux et al.,
2008; Levin et al., 1987; Teece, 2000; Teece, Pisano, & Shuen,
1997). The owners of innovations with strong appropriability
might have the con?dence to engage more widely with their
external environment, and therefore, would be better off con-
tracting with incumbents (Laursen & Salter, 2014). Moreover, suc-
cessfully commercialized products typically comprise multiple
technologies (Somaya & Teece, 2007); therefore, this study extends
the perspective of appropriability to the ?rm level and argues that
when ?rms possess the capabilities to create stronger appropri-
ability of their patents' technological knowledge, their patent
commercialization performance increases. Thus, we propose the
following:
H1: Firms with stronger levels of appropriability in patents have
higher patent commercialization performance.
Commercialization of innovative outcomes requires comple-
mentary assets. Complementary technologies, channels, competi-
tive manufacturing capabilities, and service are all important ones.
Insuf?cient necessary complementary assets may direct innovation
pro?t ?ow to rivals, suppliers, distributors, or clients (Teece, 1986).
Previous studies have reported the effects of complementary
assets when commercializing innovations in technology or product
markets. For example, Rothaermel (2001) found that incumbent
biopharmaceutical ?rms owning complementary assets critical to
commercializing new technology can adopt new technology and
radical technological change through alliances with new entrants.
The newentrants that lack commercialization experience can learn
and accumulate experiences through participation in the
commercialization process, thereby bene?tting subsequent com-
mercializations, either through self or joint development (Hsu &
Wakeman, 2013). Helfat and Lieberman (2002) concluded that
complementary assets are more important than core resources to
new entrants. Rothaermel and Hill (2005) revealed that an
incumbent ?rm's ?nancial strength has a stronger positive effect on
?rm performance in the postdiscontinuity period if the new tech-
nology can be commercialized through generic complementary
assets. Taylor and Helfat (2009) reported that incumbent ?rms
attempting to transition to a new technology require linkages be-
tween organizational units responsible for developing the new
technology and units in charge of complementary assets for
commercializing the innovation.
Commercializing a patent enables capturing pro?ts from it.
Similar to technology commercialization, ?rms may possess
insuf?cient capabilities or assets to introduce the patents to mar-
kets. For example, a research-oriented laboratory's core compe-
tence of research and development may leave it with inadequate
marketing and distribution capabilities; thus, it encounters high
risk in introducing newproducts to the market. Another example is
patentees with insuf?cient manufacturing capacities or comple-
mentary technologies already owned by other ?rms ?nd it dif?cult
to commercialize their innovations. Currently, the necessary re-
sources and capabilities for commercializing an innovation have
increasing complexity and involve multiple disciplines; hence,
?rms need more diversi?ed complementary assets. Therefore,
analogous to the effects of complementary assets on ?rm perfor-
mance when commercializing innovations, this study asserts that
possessing more complementary assets bene?ts ?rms' patent
commercialization. Thus, we propose that
J.-H. Lin, M.-Y. Wang / Asia Paci?c Management Review 20 (2015) 141e147 142
H2: Firms with more complementary assets have higher patent
commercialization performance.
Sensing is an important component of dynamic capability,
which is important to strategy (Teece, 2014). A ?rm's market
sensing capability is its capacity to gather and interpret knowledge
from the market, including from customers, competitors, and
technologies, and includes its capacity to store it all in an accessible
organizational memory (Day, 1994; Olavarrieta & Friedmann,
2008). This capability is especially important in managing
emerging technologies (Day, 1994). Teece (2007) proposed that
sensing capabilities in ?rms' business ecosystem form the basis for
building their dynamic capabilities, including sensing development
of science and technology, customer demand, and market seg-
mentation. Sensing capabilities greatly bene?t technology
commercialization.
Previous studies have found that technology commercialization
intelligence signi?cantly positively affects new product and tech-
nology commercialization performance (e.g. Brown & Eisenhardt,
1995; Kahn, 2001). Firms can reduce technology market trans-
action cost by developing the dynamic capability of identifying
market opportunities in technology transfer (Cohen & Levinthal,
1990). Market sensing capability also strongly supports ?rm inno-
vation performance. Early identi?cation of market ?uctuation and
change generates opportunities for ?rms, enabling them to hasten
the patent commercialization process (Jolly, 1997).
Lindblom, Olkkonen, Mitronen, and Kajalo (2008) found that
entrepreneurs' market sensing capability correlates positively but
weakly with the ?rm's growth, and that it is not statistically
signi?cantly related to pro?tability; therefore, they suggested that
sensing capability may have a moderating rather than a direct ef-
fect on organizational performance. Morgan, Slotegraaf, and
Vorhies (2009) demonstrated that market sensing capabilities
have no signi?cant direct effect on ?rm revenue, margin, and pro?t
growth rate, but synergistically affect brand management capa-
bility in in?uencing revenue growth rate. Their ?ndings support
arguments that superior market knowledge possibly resulting from
strong market sensing capabilities offers the greatest value in
determining ?rm's performance by indirectly in?uencing value
selection, creation, and delivery processes (e.g., Hult, Ketchen, &
Slater, 2005; Morgan, Zou, Vorhies, & Katsikeas, 2003). These dis-
cussions explain market sensing capability's indirect in?uence on
?rm performance.
The framework of dynamic capabilities indicates that appro-
priability and complementary assets relate to seizing capabilities
and decisions underlying ?rms' dynamic capability. Market sensing
capability enables ?rms to sense opportunities and threats from
their business ecosystem, and thus implement superior seizing
decisions under uncertainty. Considering that building dynamic
capabilities requires the interaction and coordination of sensing
capabilities and seizing capabilities and market sensing capabil-
ities' indirect in?uence on ?rm performance, this study argues that
when ?rms have insuf?cient complementary assets or weak
appropriability in their patents, their strong market sensing capa-
bilities help them to dynamically adjust strategies according to
their timely information about competitive environment, customer
demands, and technological opportunities, and thereby enabling
them to obtain the required complementary assets and enhance
the appropriability of their patents. Therefore, these ?rms improve
their patent commercialization performance more than those with
weak market sensing capabilities. Similarly, strong market sensing
capabilities also bene?t ?rms with suf?cient complementary assets
and weak patent appropriability in capturing pro?ts during patent
commercialization. Therefore, this study proposes the following:
H3a: The positive effect of a ?rm's patent appropriability on patent
commercialization performance increases with increasing market
sensing capability.
H3b: The positive effect of a ?rm's complementary assets on patent
commercialization performance increases with increasing market
sensing capability.
3. Research design and method
3.1. Framework and measures
We used the research framework depicted in Fig. 1 to investigate
the effects of ?rms' patent appropriability and complementary
assets on their patent commercialization performances and the
moderating effects of market sensing capabilities on the relation-
ships of appropriability and complementary assets with their pat-
ent commercialization performance.
This study contains four constructs, namely, appropriability,
complementary assets, market sensing capability, and perceived
patent commercialization performance. Table 1 presents their
operational de?nitions and measurements. Each item uses a 5-
point Likert scale ranging from “strongly disagree” (1) to
“strongly agree” (5) to measure respondents' answers.
3.2. Data collection
We collected primary survey data from biotechnology ?rms in
Taiwan. Because our hypotheses relate to patent commercializa-
tion, we only included ?rms owning biotechnology patents. To this
requirement is ful?lled, we ?rst collected Taiwanese biotechnology
patents granted by either USPTO or TIPO during 2000e2009. Based
on the concordance between technological ?elds and Schmoch's
IPC code categorization (Schmoch, 2008), we investigated six
technological ?elds: analysis of biological materials, medical tech-
nology, organic ?ne chemistry, biotechnology, pharmaceuticals,
and food chemistry. We retained patents whose applicants
included a biotechnology enterprise after unifying assignee names,
totaling 506 biotechnology patents owned by 229 ?rms. Finally,
this study obtained the 229 enterprises' addresses and directors'
names fromthe Taiwan Biotechnology Directories published by the
Ministry of Economic Affairs (MOEA), ?rms' of?cial websites, and
MOEA business registration search system.
We mailed the questionnaires between May and mid-June, 2011,
and prompted the respondents by phone to return the completed
surveys. On the phone, many ?rms responded that they cannot
provide answers because patent commercialization involves trade
secrets. We also conducted detailed interviews with senior execu-
tives of three ?rms. Finally, we collected 33 questionnaires in total,
from which we removed one invalid questionnaire because of
numerous blank items, with the remaining 32 valid questionnaires
H2
H3b
H3a
Patent
commercialization
performance
Market sensing
capability
Appropriability
Complementary
asset
H1
Fig. 1. Research framework.
J.-H. Lin, M.-Y. Wang / Asia Paci?c Management Review 20 (2015) 141e147 143
representing a 14% return rate. These 32 ?rms hold 102 patents,
representing 23.7% of the 506 patents.
Table 2 reports the descriptive statistics of the sample ?rms.
Most ?rms relate to medical devices (34%), with bio-
pharmaceuticals and food biotechnology ?rms ranked second
(12.8%). In most ?rms, the number of research and development
employees was lower than 25%. Over 70% of ?rms had sales over
NT$100 million. Regarding types of patent commercialization,
most ?rms (82.9%) implemented their patents in their own
products or processes. Few ?rms transferred or licensed out their
patents.
3.3. Data analysis method
This study tested the hypotheses using the PLS structural
equation modeling. PLS is a variance-based structural equation
modeling method and can accommodate models that combine
formative and re?ective constructs (Chin, 1998). Two well-known
covariance-based structural equation modeling methods for
testing structural equation models, linear structural relations (LIS-
REL) and analysis of moment structures (AMOS), could cause
“identi?cation problems,” possibly requiring changes in the original
model (MacCallum& Browne, 1993). In addition, PLS avoids several
restrictive assumptions underlying LISREL and AMOS (Fornell &
Bookstein, 1982), and can be applied to small sample size
(Reinartz, Haenlein, & Henseler, 2009). Therefore, PLS is more
appropriate for this study, as it has small sample size.
This study estimated parameters in models using the SmartPLS
package (Ringle, Wende, & Will, 2005) in a two-step analysis: (1)
assess measurement model adequacy by examining construct
reliability and validity and (2) test the structural model. Parameter
estimations used a bootstrapping method of sampling with
replacement, and standard errors were computed on the basis of
5000 bootstrapping runs.
4. Results
Table 3 reports the descriptive statistics of measurement items.
Appropriability construct item means are roughly 3.6, indicating
responses ranging between “agree” and “neutral” on the 5-point
Likert scale. Complementary assets construct item means range
from 3.844 to 4.344, which are higher than other construct items.
The means in perceived patent commercialization performance
construct range between 3.375 and 3.531.
This study uses PLS to assess the constructs' convergent validity
and discriminant validity. Inspection of item loadings on each
construct and evaluation of composite reliability (CR) and average
variance extracted (AVE) for the four constructs determine the
convergent validity. Each items' factor loading should exceed 0.5.
For all constructs, the CR and AVE should be above 0.7 and 0.5,
Table 1
Operationalization of constructs.
Operational de?nition Measurement item Reference
Appropriability
The abilities of free from being imitated in
patented innovations of a ?rm.
A1. Dif?cult to imitate by rivals.
A2. Secrets in patents are vague to rivals.
A3. Dif?cult to implement by rivals.
Rumelt (1984); Teece et al. (1997); Levin et al. (1987)
Complementary assets
The assets required to commercialize
patented innovations of a ?rm.
C1. Complementary technologies.
C2. Human resources.
C3. Manufacture capacity.
C4. Supporting service.
C5. Promotion channels.
Teece (1986); Svensson (2007)
Market sensing capability
The capability to gather and use the
information required to commercialize
patented innovations from markets.
S1. Acquire and use market information.
S2. Anticipate rivals' actions.
S3. Predict consumer demand.
S4. Establish database to serve customers.
S5. Integrate market and technology information.
Cohen and Levinthal (1990); Day (2002); Teece (2007)
Perceived patent commercialization performance
The performance achieved by commercializing
patented innovations.
P1. Speed of commercialization.
P2. Success in commercialization.
P3. Increasing pro?ts.
P4. Achievement of goals.
Olavarrieta and Friedmann (2008)
Table 2
Descriptive statistics of ?rms.
Variable Category n % Variable Category n %
Sales (NT$) Less than 10 million 1 3.1 Types of Business
a
Biopharmaceuticals 6 12.8
10 million to less than 40 million 5 15.6 Medical devices 16 34
40 million to less than 100 million 4 12.5 Biotech or pharmaceutical services 2 4.3
100 million to less than 1000 million 11 34.4 Specialty biochemicals 2 4.3
Over 1000 million 11 34.4 Agricultural biotechnology 3 6.4
R&D employees Less than 25% 18 56.3 Food biotechnology 6 12.8
25%e50% 7 21.9 Active pharmaceutical ingredient 4 8.5
51%e75% 4 12.5 Pharmaceuticals 4 8.5
Over 75% 3 9.4 Herbal medicine 1 2.1
Types of commercialization
a
License out or transfer to overseas ?rms 2 5.7 Regenerative medicine 0 0
License out or transfer to Taiwanese ?rms 3 8.6 Others 3 6.4
Implement into products or processes 29 82.9
Not commercialized 1 2.9
a
Multiple choices are allowed.
J.-H. Lin, M.-Y. Wang / Asia Paci?c Management Review 20 (2015) 141e147 144
respectively (Hair, Ringle, & Sarstedt, 2013). For our original mea-
surement model, all loading estimates exceed 0.5, but the AVE
values of complementary assets and market sensing capability
constructs are below the required threshold of 0.5. After removing
the lowest-loading item in each construct (items C3 and S4 in
Table 3), the values of AVE and CR meet the requirements. Subse-
quently, we assessed the discriminant validity for the modi?ed
measurement model by comparing the AVE value square roots for
any two constructs with the correlation estimate between these
two constructs. A model with discriminant validity should have
AVE value square roots greater than the correlation estimate
(Fornell & Larcker, 1981). As Table 4 reports, each AVE (diagonal
element) is greater than the correlation estimates (lower triangular
matrix), demonstrating the modi?ed model's good discriminant
validity.
Given the adequacy of the measurement model, we can proceed
with testing the proposed hypotheses by evaluating the structural
model. Table 5 reports the outcomes of hypothesis testing and the
explained variance of the model. Model 1 contains main effects, and
the value of R
2
is 0.430. The main effect of appropriability on
perceived patent commercialization performance is supported at
the 0.05 level (path estimate ¼0.2113), and complementary assets'
effect is statistically signi?cant at the 0.01 level (path
estimate ¼0.3631), supporting Hypotheses 1 and 2. Model 2
captures the moderating effect of market sensing capability on the
relationship between appropriability and perceived patent
commercialization performance. The t statistic capturing positive
moderating effect's existence is 1.4736, which is not statistically
signi?cant at the 0.05 level. Therefore, Hypothesis 3a is not sup-
ported. Model 3 includes the moderating effect of market sensing
capability on the relationship between complementary assets and
perceived patent commercialization performance. The t statistic of
the interaction term is 1.6945, and the path estimate is 0.3484,
demonstrating that market sensing capability signi?cantly posi-
tively moderates the relationship between complementary assets
and commercialization performance at the 0.05 level. Therefore,
Hypothesis 3b is supported at the 0.05 level. A comparison of
Models 1 and 3 reveals that after including the moderating variable,
R
2
increases by 9.5%, which is attributable to the moderating effect
of market sensing capability. Furthermore, we can assess the
strength of moderating effect by effect size. An effect size is a
proportion in which the numerator is the variance explained by the
model with moderators net of that without moderators, and the
denominator is one minus the variance explained by the model
with moderators (Cohen, 1988). According to Chin (1998), effect
sizes exceeding 0.02, 0.15, and 0.35 may be regarded as weak,
moderate, and strong effects, respectively. The moderating effect of
market sensing capability on the relationship between
Table 3
Descriptive statistics and loadings of measurement items.
Measurement item Mean Standard deviation Loading Measurement item Mean Standard deviation Loading
Complementary assets Market sensing capability
C1. Technologies 3.844 0.677 0.733 S1. Acquire information 3.75 0.672 0.700
C2. Human resources 3.844 0.723 0.789 S2. Anticipate actions 3.563 0.619 0.655
C3. Capacity 4.344 0.483 Removed S3. Predict demand 3.75 0.672 0.670
C4. Service 4.031 0.695 0.727 S4. Establish database 3.531 0.842 Removed
C5. Channels 4.094 0.734 0.557 S5. Integrate information 3.500 0.950 0.887
Appropriability Perceived patent commercialization performance
A1. Dif?cult to imitate 3.688 0.821 0.902 P1. Speed 3.375 0.793 0.777
A2. Secrets are vague 3.656 0.745 0.953 P2. Success 3.469 0.761 0.653
A3. Hard to implement 3.531 0.803 0.846 P3. Pro?ts 3.469 0.842 0.822
P4. Goals 3.531 0.842 0.775
Table 4
Construct-level measurement statistics and correlation of constructs.
Construct APPR COMP MKTS PERF No. of items Composite reliability
Appropriability (APPR) 0.901 3 0.928
Complementary assets (COMP) 0.434 0.707 4 0.797
Market sensing capability (MKTS) 0.278 0.533 0.734 4 0.821
Perceived patent commercialization performance (PERF) 0.438 0.587 0.500 0.759 4 0.844
Diagonal elements in bold are square roots of average variance extracted.
Table 5
PLS path analysis results.
Model 1 Model 2 Model 3 Model 4
Estimate (t) Estimate (t) Estimate (t) Estimate (t)
Appropriability 0.211 (1.769*) 0.054 (0.443) 0.099 (1.125) 0.102 (0.953)
Complementary assets 0.363 (2.686**) 0.403 (2.836***) 0.243 (2.400**) 0.241 (1.933*)
Market sensing capability 0.248 (3.249****) 0.171 (2.015*) 0.297 (3.260****) 0.299 (2.884***)
Appropriability  market sensing capability À0.2489 (1.477) 0.008 (0.037)
Complementary assets  market sensing capability 0.348 (1.695*) 0.352 (1.484)
R
2
0.430 0.442 0.525 0.525
Hypothesis H1, H2 H3a H3b
*Signi?cant at 0.05 (T > 1.645).
**Signi?cant at 0.01 (T > 2.33).
*** Signi?cant at 0.005 (T > 2.58).
**** Signi?cant at 0.001 (T > 3.08; one tailed).
J.-H. Lin, M.-Y. Wang / Asia Paci?c Management Review 20 (2015) 141e147 145
complementary assets and commercialization performance is
0.175, indicating a moderate effect.
5. Discussion and conclusions
5.1. Discussion
This study examines factors that may affect patent commer-
cialization performance by building on the PFI framework and
incorporating market sensing capability. We argue that the capa-
bility to create innovations with appropriability and the capacity of
complementary assets positively affect patent commercialization
performance of ?rms. We extract the market sensing capability
from the dynamic capabilities and argue that this capability mod-
erates the relationship among appropriability, complementary as-
sets, and patent commercialization performance. We test our
arguments on Taiwanese ?rms with biotechnological or pharma-
ceutical patents.
The results demonstrate that both capability to create in-
novations with appropriability and capacity of complementary
assets correlate positively with ?rms' patent commercialization
performance. The results con?rm the PFI framework. The result
related to the effect of appropriability suggests that ?rms must
enhance their capabilities in developing technologies with high
appropriability. Although laws offer exclusive rights to granted
patents, they cannot prohibit other ?rms from imitating or using
the patents by design around. Firms can achieve success in
commercializing patents only by obtaining patents with high
appropriability, thus further increasing economic return, enlarging
market share, and sustaining competitive advantages.
The signi?cant positive effect of complementary assets on pat-
ent commercialization performance indicates that commercializing
patents is not an independent activity; rather, ?rm performance
correlates with the establishment of complementary assets
necessary for commercialization. Complementary technologies,
quali?ed human resources, supporting services, and suf?cient
promotion channels are necessary assets to commercialize ?rms'
patents.
Market sensing capability's moderating effect on the relation-
ship between appropriability and patent commercialization per-
formance is not statistically signi?cant; thus, it does not in?uence
the effect of appropriability on patent commercialization perfor-
mance. Accordingly, given their level of market sensing capability,
?rms can manage commercialization on the basis of their patents'
appropriability level. The ?nding that market sensing capability
signi?cantly positively moderates the relationship between com-
plementary assets and patent commercialization performance
suggests that ?rms with suf?cient complementary assets can
bene?t more from market sensing capability than those without
them. When ?rms can assess complementary assets required for
commercializing their patents, their strong market sensing capa-
bility allows them to rapidly and accurately gather and interpret
market knowledge and to recognize emerging opportunities
matching their patents and complementary assets, thereby
enabling them to achieve higher commercialization performance.
5.2. Implications
This study emphasizes the factor effects derived from the PFI
framework and dynamic capabilities on the performance of patent
commercialization; thus, our ?ndings can advance new perspec-
tives on dynamic capability and patent commercialization for
academia. In the dynamic capability framework, appropriability
and complementary assets relate to the decision for seizing op-
portunities, and market sensing capability is a key element of
sensing capabilities. They are foundations to form ?rms' dynamic
capability. The results of this study provide some evidence that the
interactions between seizing and sensing capabilities enable ?rms
to outperform others in patent commercialization, and thus to
enhance their sustained competitive advantage.
Previous studies analyzing the performance of patent
commercialization typically focused on patent-level or technology-
level factors, which imply the following three conditions: one
commercialized product comprises one underlying patent, the
knowledge content among patents is independent fromothers, and
the successes in commercializing patents are unrelated to organi-
zational capabilities. To overcome the aforementioned drawbacks,
this study connects the in?uencing factors to ?rm-level organiza-
tional capabilities, demonstrating a new viewpoint to examine the
performance of patent commercialization.
Moreover, this study addresses implications for patent man-
agement. Our ?ndings suggest that, to achieve high performance in
commercializing patents, patent management practitioners must
facilitate ?rms' patenting innovations with high level of appropri-
ability, acquiring complementary assets required for commerciali-
zation, enhancing ?rms' market sensing capability, and ensuring
interactions between their market sensing capability and their
seizing capabilities, and making decisions based on their controlled
complementary assets.
To obtain the bene?ts of interaction between market sensing
capability and seizing capabilities, ?rms can establish patent
management practices that integrate and coordinate patent-related
resources and information across functional boundaries, including
patent generation (research and development), protection (legal),
and utilization (market and business development) activities, and
balance specialization within activity and coordination between
activities to extract the value fromtheir patents. Firms not only rely
solely on their own IP creation, but also scan the market environ-
ment for complementary IPs and assets to ?ll gaps in their patent
portfolios, seize commercialization opportunities, and satisfy
customer needs.
Regarding to future research, the returned questionnaires sug-
gest that most ?rms implemented patents in their own processes or
products, whereas few licensed out their patents. Therefore, the
?ndings and conclusions in this study more appropriately explain
the relationships for ?rms that implement patents in their own
processes or products. Future research can select industries or
countries where ?rms more commonly license out their patents,
and in that context, examine the relationships among appropri-
ability, complementary assets, market sensing capability, and pat-
ent commercialization performance.
Con?icts of interest
All contributing authors declare no con?icts of interest.
Acknowledgement
The authors thank the support of National Scienti?c Council of
Taiwan to this work under Grant No. NSC 100-2410-H-415-029-
MY2.
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J.-H. Lin, M.-Y. Wang / Asia Paci?c Management Review 20 (2015) 141e147 147
doc_592660318.pdf
Based on the framework of profit from innovation, the factors affecting patent commercialization performance
include innovation appropriability and firms' complementary assets. The framework of dynamic
capabilities illustrates that appropriability and complementary assets are seizing capabilities
underlying firms' dynamic capabilities, and market sensing capabilities are one type of sensing capabilities.
This study argues that not only seizing capabilities but also interactions between seizing and
market sensing capabilities affect patent commercialization performance. Based on the surveyed data
from Taiwanese firms owning biotechnological patents, this study finds that complementary assets and
patented innovation appropriability significantly positively affect patent commercialization performance.
Market sensing capabilities significantly positively moderate the relationship between complementary
assets and patent commercialization performance, whereas their moderating effect on appropriability
and commercialization performance is not significant. Finally, this study provides suggestions for patent
management practitioners.
Complementary assets, appropriability, and patent commercialization: Market
sensing capability as a moderator
Jie-Heng Lin
a
, Ming-Yeu Wang
b, *
a
Graduate School of Business Administration, National Taiwan University, Taipei, Taiwan
b
Department of BioBusiness Management, (Formerly known as Department of Bio-industry and Agribusiness Administration), National Chiayi University, Taiwan
a r t i c l e i n f o
Article history:
Received 17 February 2014
Accepted 22 September 2014
Available online 30 March 2015
Keywords:
Appropriability
Complementary asset
Market sensing capability
Patent commercialization
a b s t r a c t
Based on the framework of pro?t from innovation, the factors affecting patent commercialization per-
formance include innovation appropriability and ?rms' complementary assets. The framework of dy-
namic capabilities illustrates that appropriability and complementary assets are seizing capabilities
underlying ?rms' dynamic capabilities, and market sensing capabilities are one type of sensing capa-
bilities. This study argues that not only seizing capabilities but also interactions between seizing and
market sensing capabilities affect patent commercialization performance. Based on the surveyed data
from Taiwanese ?rms owning biotechnological patents, this study ?nds that complementary assets and
patented innovation appropriability signi?cantly positively affect patent commercialization performance.
Market sensing capabilities signi?cantly positively moderate the relationship between complementary
assets and patent commercialization performance, whereas their moderating effect on appropriability
and commercialization performance is not signi?cant. Finally, this study provides suggestions for patent
management practitioners.
© 2015, College of Management, National Cheng Kung University. Production and hosting by Elsevier
Taiwan LLC. All rights reserved.
1. Introduction
Commercializing patented innovations (hereinafter patents) is
an important stage of improving organizational performance. The
de?nition of patent commercialization is similar to that of
commercializing a technology (Shane, 2001; Svensson, 2007; Teece,
1986), which includes selling, transferring, or licensing out patented
technologies to existing ?rms, to establish new?rms on the basis of
patented technologies or to implement patented technologies in
patentees' products or manufacturing processes. Although the
de?nition of patent commercialization is similar to that of technol-
ogy commercialization, the costs of holding patents make
commercializing patents more critical. During the period of holding
a patent, ?rms have to pay considerable fees, such as ?lling and
maintenance fees. Moreover, maintenance fees increase during the
granted duration (Bessen, 2008). Effectively commercializing their
patents byevaluating the determinants of patent commercialization
increases returns and thereby improves ?rm performance.
Prior studies have identi?ed factors affecting the performance of
patent commercialization. These studies have typically investigated
patent-level or technology-level factors, such as patent scope,
patent age, citations, and science linkage (e.g., Dechenaux,
Goldfarb, Shane, & Thursby, 2008; Nerkar & Shane, 2007). How-
ever, products are complex artifacts that consist of different un-
derlying technologies and knowledge that interact with one
another (Peine, 2009), and creating products that address customer
needs and achieve market success requires the combination of
multiple technologies (Somaya & Teece, 2007). Because this
complexity requires investigation of ?rm-level in?uential factors,
this study focuses on the effects of ?rm-level organizational capa-
bilities by examining previous technology commercialization
studies.
Teece (1986) proposed the well-known pro?ting from innova-
tion (PFI) framework to explain how organizations can capture
pro?ts from technology commercialization. This framework uses
appropriability and complementary assets as two crucial de-
terminants. Appropriability indicates the imitability of the inno-
vation. A technology with strong appropriability is hard to imitate,
enabling innovators to monopolize the pro?ts from its
* Corresponding author. Department of BioBusiness Management, (Formerly
known as Department of Bio-industry and Agribusiness Administration), National
Chiayi University, Number 580, Sinmin Road, Chiayi City 60054, Taiwan.
E-mail address: [email protected] (M.-Y. Wang).
Peer review under responsibility of College of Management, National Cheng Kung
University.
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1029-3132/© 2015, College of Management, National Cheng Kung University. Production and hosting by Elsevier Taiwan LLC. All rights reserved.
Asia Paci?c Management Review 20 (2015) 141e147
commercialization. Applying for patents establishes legal impedi-
ments that prevent imitating technologies. Given a ?rm's estab-
lishing of legal barriers and paying for disclosing technology
knowledge to the public, that knowledge's inherent replicability by
other ?rms further explains how patentees can capture the value
from their own innovations (Levin et al., 1987). This study extends
the concept of appropriability to ?rm-level patentees and
investigates whether the ?rm's capability to generate highly
appropriable patent knowledge can advance its patent commer-
cialization performance.
Complementary assets refer to the ?rm's assets or capabilities
[rather than technology or intellectual property (IP)] necessary for
successfully commercializing technologies, which include
manufacturing capacity, distribution channels, after-sales service,
brands, and complementary technologies (Teece, 1986). Comple-
mentary assets strongly shape ?rms' strategies and evolution paths,
potentially affecting returns on innovations.
In Teece's framework of dynamic capabilities, appropriability
and complementary assets relate to seizing decisions and capa-
bilities underlying ?rms' dynamic capability as key elements in
selecting enterprise boundaries and eventually affecting ?rm
performance (Teece, 2007). Firms require sensing capabilities to
identify opportunities and threats from their business ecosystem.
Market sensing capability is one type of sensing capabilities,
which involves the capabilities of gathering and ?ltering market
information from outside and inside the ?rm, determining its
meaning, and drawing implications for action that can reduce
commercialization process uncertainty and increase opportunities
for successful commercial innovation (Day, 1994; Teece, 2007). The
probability of an innovation's commercial success correlates
highly with the developers' understanding of customer needs
(Brown & Eisenhardt, 1995; Kahn, 2001) and top managers'
sensitivity to markets (Day, 2002). The ability to sense markets
enables ?rms to anticipate new technologies' potential, leading to
successful development activities (Teece, 2010). Therefore, on the
basis of the PFI framework, this study investigates the effects of
?rms' complementary assets and patents' appropriability on pat-
ent commercialization performance. Supplemented by the
framework of dynamic capabilities, this study further investigates
the moderating effects of market sensing capability on the rela-
tionship between seizing capabilities, speci?cally complementary
assets and appropriability, and patent commercialization
performance.
We empirically surveyed Taiwanese ?rms with biotechnolog-
ical patents granted by either the United States Patent and
Trademark Of?ce (USPTO) or Taiwan Intellectual Property Of?ce
(TIPO) 2000e2009, and applied partial least squares (PLS) struc-
tural equation modeling to analyze the effects. The results
contribute to understanding the relationships among comple-
mentary assets, appropriability, market sensing capability, and
patent commercialization performance. Finally, this study ad-
dresses the implications of dynamic capability and patent
commercialization for academia and offers suggestions to patent
management practitioners for increasing pro?ts from patent
commercialization.
2. Theoretical background and hypotheses
Firms can earn great bene?ts from patent commercialization,
which include increasing revenue and market share, maintaining
growth and competitiveness, and creating new opportunities and
new ?rms (e.g., Dechenaux et al., 2008; Shane, 2001). The present
study contributes to understanding ?rm-level in?uential factors of
patent commercialization performance based on the PFI frame-
work. The framework explains that appropriability determines the
success of technology commercialization. During the process of
patent commercialization, a ?rm may encounter uncertainties and
rivals' imitations. For an innovation, high appropriability frees the
owner from imitation by rivals, thus reducing uncertainties in
commercializing patents and providing patentees greater bargai-
ning power for successful commercialization (Dechenaux et al.,
2008; Levin et al., 1987; Teece, 2000; Teece, Pisano, & Shuen,
1997). The owners of innovations with strong appropriability
might have the con?dence to engage more widely with their
external environment, and therefore, would be better off con-
tracting with incumbents (Laursen & Salter, 2014). Moreover, suc-
cessfully commercialized products typically comprise multiple
technologies (Somaya & Teece, 2007); therefore, this study extends
the perspective of appropriability to the ?rm level and argues that
when ?rms possess the capabilities to create stronger appropri-
ability of their patents' technological knowledge, their patent
commercialization performance increases. Thus, we propose the
following:
H1: Firms with stronger levels of appropriability in patents have
higher patent commercialization performance.
Commercialization of innovative outcomes requires comple-
mentary assets. Complementary technologies, channels, competi-
tive manufacturing capabilities, and service are all important ones.
Insuf?cient necessary complementary assets may direct innovation
pro?t ?ow to rivals, suppliers, distributors, or clients (Teece, 1986).
Previous studies have reported the effects of complementary
assets when commercializing innovations in technology or product
markets. For example, Rothaermel (2001) found that incumbent
biopharmaceutical ?rms owning complementary assets critical to
commercializing new technology can adopt new technology and
radical technological change through alliances with new entrants.
The newentrants that lack commercialization experience can learn
and accumulate experiences through participation in the
commercialization process, thereby bene?tting subsequent com-
mercializations, either through self or joint development (Hsu &
Wakeman, 2013). Helfat and Lieberman (2002) concluded that
complementary assets are more important than core resources to
new entrants. Rothaermel and Hill (2005) revealed that an
incumbent ?rm's ?nancial strength has a stronger positive effect on
?rm performance in the postdiscontinuity period if the new tech-
nology can be commercialized through generic complementary
assets. Taylor and Helfat (2009) reported that incumbent ?rms
attempting to transition to a new technology require linkages be-
tween organizational units responsible for developing the new
technology and units in charge of complementary assets for
commercializing the innovation.
Commercializing a patent enables capturing pro?ts from it.
Similar to technology commercialization, ?rms may possess
insuf?cient capabilities or assets to introduce the patents to mar-
kets. For example, a research-oriented laboratory's core compe-
tence of research and development may leave it with inadequate
marketing and distribution capabilities; thus, it encounters high
risk in introducing newproducts to the market. Another example is
patentees with insuf?cient manufacturing capacities or comple-
mentary technologies already owned by other ?rms ?nd it dif?cult
to commercialize their innovations. Currently, the necessary re-
sources and capabilities for commercializing an innovation have
increasing complexity and involve multiple disciplines; hence,
?rms need more diversi?ed complementary assets. Therefore,
analogous to the effects of complementary assets on ?rm perfor-
mance when commercializing innovations, this study asserts that
possessing more complementary assets bene?ts ?rms' patent
commercialization. Thus, we propose that
J.-H. Lin, M.-Y. Wang / Asia Paci?c Management Review 20 (2015) 141e147 142
H2: Firms with more complementary assets have higher patent
commercialization performance.
Sensing is an important component of dynamic capability,
which is important to strategy (Teece, 2014). A ?rm's market
sensing capability is its capacity to gather and interpret knowledge
from the market, including from customers, competitors, and
technologies, and includes its capacity to store it all in an accessible
organizational memory (Day, 1994; Olavarrieta & Friedmann,
2008). This capability is especially important in managing
emerging technologies (Day, 1994). Teece (2007) proposed that
sensing capabilities in ?rms' business ecosystem form the basis for
building their dynamic capabilities, including sensing development
of science and technology, customer demand, and market seg-
mentation. Sensing capabilities greatly bene?t technology
commercialization.
Previous studies have found that technology commercialization
intelligence signi?cantly positively affects new product and tech-
nology commercialization performance (e.g. Brown & Eisenhardt,
1995; Kahn, 2001). Firms can reduce technology market trans-
action cost by developing the dynamic capability of identifying
market opportunities in technology transfer (Cohen & Levinthal,
1990). Market sensing capability also strongly supports ?rm inno-
vation performance. Early identi?cation of market ?uctuation and
change generates opportunities for ?rms, enabling them to hasten
the patent commercialization process (Jolly, 1997).
Lindblom, Olkkonen, Mitronen, and Kajalo (2008) found that
entrepreneurs' market sensing capability correlates positively but
weakly with the ?rm's growth, and that it is not statistically
signi?cantly related to pro?tability; therefore, they suggested that
sensing capability may have a moderating rather than a direct ef-
fect on organizational performance. Morgan, Slotegraaf, and
Vorhies (2009) demonstrated that market sensing capabilities
have no signi?cant direct effect on ?rm revenue, margin, and pro?t
growth rate, but synergistically affect brand management capa-
bility in in?uencing revenue growth rate. Their ?ndings support
arguments that superior market knowledge possibly resulting from
strong market sensing capabilities offers the greatest value in
determining ?rm's performance by indirectly in?uencing value
selection, creation, and delivery processes (e.g., Hult, Ketchen, &
Slater, 2005; Morgan, Zou, Vorhies, & Katsikeas, 2003). These dis-
cussions explain market sensing capability's indirect in?uence on
?rm performance.
The framework of dynamic capabilities indicates that appro-
priability and complementary assets relate to seizing capabilities
and decisions underlying ?rms' dynamic capability. Market sensing
capability enables ?rms to sense opportunities and threats from
their business ecosystem, and thus implement superior seizing
decisions under uncertainty. Considering that building dynamic
capabilities requires the interaction and coordination of sensing
capabilities and seizing capabilities and market sensing capabil-
ities' indirect in?uence on ?rm performance, this study argues that
when ?rms have insuf?cient complementary assets or weak
appropriability in their patents, their strong market sensing capa-
bilities help them to dynamically adjust strategies according to
their timely information about competitive environment, customer
demands, and technological opportunities, and thereby enabling
them to obtain the required complementary assets and enhance
the appropriability of their patents. Therefore, these ?rms improve
their patent commercialization performance more than those with
weak market sensing capabilities. Similarly, strong market sensing
capabilities also bene?t ?rms with suf?cient complementary assets
and weak patent appropriability in capturing pro?ts during patent
commercialization. Therefore, this study proposes the following:
H3a: The positive effect of a ?rm's patent appropriability on patent
commercialization performance increases with increasing market
sensing capability.
H3b: The positive effect of a ?rm's complementary assets on patent
commercialization performance increases with increasing market
sensing capability.
3. Research design and method
3.1. Framework and measures
We used the research framework depicted in Fig. 1 to investigate
the effects of ?rms' patent appropriability and complementary
assets on their patent commercialization performances and the
moderating effects of market sensing capabilities on the relation-
ships of appropriability and complementary assets with their pat-
ent commercialization performance.
This study contains four constructs, namely, appropriability,
complementary assets, market sensing capability, and perceived
patent commercialization performance. Table 1 presents their
operational de?nitions and measurements. Each item uses a 5-
point Likert scale ranging from “strongly disagree” (1) to
“strongly agree” (5) to measure respondents' answers.
3.2. Data collection
We collected primary survey data from biotechnology ?rms in
Taiwan. Because our hypotheses relate to patent commercializa-
tion, we only included ?rms owning biotechnology patents. To this
requirement is ful?lled, we ?rst collected Taiwanese biotechnology
patents granted by either USPTO or TIPO during 2000e2009. Based
on the concordance between technological ?elds and Schmoch's
IPC code categorization (Schmoch, 2008), we investigated six
technological ?elds: analysis of biological materials, medical tech-
nology, organic ?ne chemistry, biotechnology, pharmaceuticals,
and food chemistry. We retained patents whose applicants
included a biotechnology enterprise after unifying assignee names,
totaling 506 biotechnology patents owned by 229 ?rms. Finally,
this study obtained the 229 enterprises' addresses and directors'
names fromthe Taiwan Biotechnology Directories published by the
Ministry of Economic Affairs (MOEA), ?rms' of?cial websites, and
MOEA business registration search system.
We mailed the questionnaires between May and mid-June, 2011,
and prompted the respondents by phone to return the completed
surveys. On the phone, many ?rms responded that they cannot
provide answers because patent commercialization involves trade
secrets. We also conducted detailed interviews with senior execu-
tives of three ?rms. Finally, we collected 33 questionnaires in total,
from which we removed one invalid questionnaire because of
numerous blank items, with the remaining 32 valid questionnaires
H2
H3b
H3a
Patent
commercialization
performance
Market sensing
capability
Appropriability
Complementary
asset
H1
Fig. 1. Research framework.
J.-H. Lin, M.-Y. Wang / Asia Paci?c Management Review 20 (2015) 141e147 143
representing a 14% return rate. These 32 ?rms hold 102 patents,
representing 23.7% of the 506 patents.
Table 2 reports the descriptive statistics of the sample ?rms.
Most ?rms relate to medical devices (34%), with bio-
pharmaceuticals and food biotechnology ?rms ranked second
(12.8%). In most ?rms, the number of research and development
employees was lower than 25%. Over 70% of ?rms had sales over
NT$100 million. Regarding types of patent commercialization,
most ?rms (82.9%) implemented their patents in their own
products or processes. Few ?rms transferred or licensed out their
patents.
3.3. Data analysis method
This study tested the hypotheses using the PLS structural
equation modeling. PLS is a variance-based structural equation
modeling method and can accommodate models that combine
formative and re?ective constructs (Chin, 1998). Two well-known
covariance-based structural equation modeling methods for
testing structural equation models, linear structural relations (LIS-
REL) and analysis of moment structures (AMOS), could cause
“identi?cation problems,” possibly requiring changes in the original
model (MacCallum& Browne, 1993). In addition, PLS avoids several
restrictive assumptions underlying LISREL and AMOS (Fornell &
Bookstein, 1982), and can be applied to small sample size
(Reinartz, Haenlein, & Henseler, 2009). Therefore, PLS is more
appropriate for this study, as it has small sample size.
This study estimated parameters in models using the SmartPLS
package (Ringle, Wende, & Will, 2005) in a two-step analysis: (1)
assess measurement model adequacy by examining construct
reliability and validity and (2) test the structural model. Parameter
estimations used a bootstrapping method of sampling with
replacement, and standard errors were computed on the basis of
5000 bootstrapping runs.
4. Results
Table 3 reports the descriptive statistics of measurement items.
Appropriability construct item means are roughly 3.6, indicating
responses ranging between “agree” and “neutral” on the 5-point
Likert scale. Complementary assets construct item means range
from 3.844 to 4.344, which are higher than other construct items.
The means in perceived patent commercialization performance
construct range between 3.375 and 3.531.
This study uses PLS to assess the constructs' convergent validity
and discriminant validity. Inspection of item loadings on each
construct and evaluation of composite reliability (CR) and average
variance extracted (AVE) for the four constructs determine the
convergent validity. Each items' factor loading should exceed 0.5.
For all constructs, the CR and AVE should be above 0.7 and 0.5,
Table 1
Operationalization of constructs.
Operational de?nition Measurement item Reference
Appropriability
The abilities of free from being imitated in
patented innovations of a ?rm.
A1. Dif?cult to imitate by rivals.
A2. Secrets in patents are vague to rivals.
A3. Dif?cult to implement by rivals.
Rumelt (1984); Teece et al. (1997); Levin et al. (1987)
Complementary assets
The assets required to commercialize
patented innovations of a ?rm.
C1. Complementary technologies.
C2. Human resources.
C3. Manufacture capacity.
C4. Supporting service.
C5. Promotion channels.
Teece (1986); Svensson (2007)
Market sensing capability
The capability to gather and use the
information required to commercialize
patented innovations from markets.
S1. Acquire and use market information.
S2. Anticipate rivals' actions.
S3. Predict consumer demand.
S4. Establish database to serve customers.
S5. Integrate market and technology information.
Cohen and Levinthal (1990); Day (2002); Teece (2007)
Perceived patent commercialization performance
The performance achieved by commercializing
patented innovations.
P1. Speed of commercialization.
P2. Success in commercialization.
P3. Increasing pro?ts.
P4. Achievement of goals.
Olavarrieta and Friedmann (2008)
Table 2
Descriptive statistics of ?rms.
Variable Category n % Variable Category n %
Sales (NT$) Less than 10 million 1 3.1 Types of Business
a
Biopharmaceuticals 6 12.8
10 million to less than 40 million 5 15.6 Medical devices 16 34
40 million to less than 100 million 4 12.5 Biotech or pharmaceutical services 2 4.3
100 million to less than 1000 million 11 34.4 Specialty biochemicals 2 4.3
Over 1000 million 11 34.4 Agricultural biotechnology 3 6.4
R&D employees Less than 25% 18 56.3 Food biotechnology 6 12.8
25%e50% 7 21.9 Active pharmaceutical ingredient 4 8.5
51%e75% 4 12.5 Pharmaceuticals 4 8.5
Over 75% 3 9.4 Herbal medicine 1 2.1
Types of commercialization
a
License out or transfer to overseas ?rms 2 5.7 Regenerative medicine 0 0
License out or transfer to Taiwanese ?rms 3 8.6 Others 3 6.4
Implement into products or processes 29 82.9
Not commercialized 1 2.9
a
Multiple choices are allowed.
J.-H. Lin, M.-Y. Wang / Asia Paci?c Management Review 20 (2015) 141e147 144
respectively (Hair, Ringle, & Sarstedt, 2013). For our original mea-
surement model, all loading estimates exceed 0.5, but the AVE
values of complementary assets and market sensing capability
constructs are below the required threshold of 0.5. After removing
the lowest-loading item in each construct (items C3 and S4 in
Table 3), the values of AVE and CR meet the requirements. Subse-
quently, we assessed the discriminant validity for the modi?ed
measurement model by comparing the AVE value square roots for
any two constructs with the correlation estimate between these
two constructs. A model with discriminant validity should have
AVE value square roots greater than the correlation estimate
(Fornell & Larcker, 1981). As Table 4 reports, each AVE (diagonal
element) is greater than the correlation estimates (lower triangular
matrix), demonstrating the modi?ed model's good discriminant
validity.
Given the adequacy of the measurement model, we can proceed
with testing the proposed hypotheses by evaluating the structural
model. Table 5 reports the outcomes of hypothesis testing and the
explained variance of the model. Model 1 contains main effects, and
the value of R
2
is 0.430. The main effect of appropriability on
perceived patent commercialization performance is supported at
the 0.05 level (path estimate ¼0.2113), and complementary assets'
effect is statistically signi?cant at the 0.01 level (path
estimate ¼0.3631), supporting Hypotheses 1 and 2. Model 2
captures the moderating effect of market sensing capability on the
relationship between appropriability and perceived patent
commercialization performance. The t statistic capturing positive
moderating effect's existence is 1.4736, which is not statistically
signi?cant at the 0.05 level. Therefore, Hypothesis 3a is not sup-
ported. Model 3 includes the moderating effect of market sensing
capability on the relationship between complementary assets and
perceived patent commercialization performance. The t statistic of
the interaction term is 1.6945, and the path estimate is 0.3484,
demonstrating that market sensing capability signi?cantly posi-
tively moderates the relationship between complementary assets
and commercialization performance at the 0.05 level. Therefore,
Hypothesis 3b is supported at the 0.05 level. A comparison of
Models 1 and 3 reveals that after including the moderating variable,
R
2
increases by 9.5%, which is attributable to the moderating effect
of market sensing capability. Furthermore, we can assess the
strength of moderating effect by effect size. An effect size is a
proportion in which the numerator is the variance explained by the
model with moderators net of that without moderators, and the
denominator is one minus the variance explained by the model
with moderators (Cohen, 1988). According to Chin (1998), effect
sizes exceeding 0.02, 0.15, and 0.35 may be regarded as weak,
moderate, and strong effects, respectively. The moderating effect of
market sensing capability on the relationship between
Table 3
Descriptive statistics and loadings of measurement items.
Measurement item Mean Standard deviation Loading Measurement item Mean Standard deviation Loading
Complementary assets Market sensing capability
C1. Technologies 3.844 0.677 0.733 S1. Acquire information 3.75 0.672 0.700
C2. Human resources 3.844 0.723 0.789 S2. Anticipate actions 3.563 0.619 0.655
C3. Capacity 4.344 0.483 Removed S3. Predict demand 3.75 0.672 0.670
C4. Service 4.031 0.695 0.727 S4. Establish database 3.531 0.842 Removed
C5. Channels 4.094 0.734 0.557 S5. Integrate information 3.500 0.950 0.887
Appropriability Perceived patent commercialization performance
A1. Dif?cult to imitate 3.688 0.821 0.902 P1. Speed 3.375 0.793 0.777
A2. Secrets are vague 3.656 0.745 0.953 P2. Success 3.469 0.761 0.653
A3. Hard to implement 3.531 0.803 0.846 P3. Pro?ts 3.469 0.842 0.822
P4. Goals 3.531 0.842 0.775
Table 4
Construct-level measurement statistics and correlation of constructs.
Construct APPR COMP MKTS PERF No. of items Composite reliability
Appropriability (APPR) 0.901 3 0.928
Complementary assets (COMP) 0.434 0.707 4 0.797
Market sensing capability (MKTS) 0.278 0.533 0.734 4 0.821
Perceived patent commercialization performance (PERF) 0.438 0.587 0.500 0.759 4 0.844
Diagonal elements in bold are square roots of average variance extracted.
Table 5
PLS path analysis results.
Model 1 Model 2 Model 3 Model 4
Estimate (t) Estimate (t) Estimate (t) Estimate (t)
Appropriability 0.211 (1.769*) 0.054 (0.443) 0.099 (1.125) 0.102 (0.953)
Complementary assets 0.363 (2.686**) 0.403 (2.836***) 0.243 (2.400**) 0.241 (1.933*)
Market sensing capability 0.248 (3.249****) 0.171 (2.015*) 0.297 (3.260****) 0.299 (2.884***)
Appropriability  market sensing capability À0.2489 (1.477) 0.008 (0.037)
Complementary assets  market sensing capability 0.348 (1.695*) 0.352 (1.484)
R
2
0.430 0.442 0.525 0.525
Hypothesis H1, H2 H3a H3b
*Signi?cant at 0.05 (T > 1.645).
**Signi?cant at 0.01 (T > 2.33).
*** Signi?cant at 0.005 (T > 2.58).
**** Signi?cant at 0.001 (T > 3.08; one tailed).
J.-H. Lin, M.-Y. Wang / Asia Paci?c Management Review 20 (2015) 141e147 145
complementary assets and commercialization performance is
0.175, indicating a moderate effect.
5. Discussion and conclusions
5.1. Discussion
This study examines factors that may affect patent commer-
cialization performance by building on the PFI framework and
incorporating market sensing capability. We argue that the capa-
bility to create innovations with appropriability and the capacity of
complementary assets positively affect patent commercialization
performance of ?rms. We extract the market sensing capability
from the dynamic capabilities and argue that this capability mod-
erates the relationship among appropriability, complementary as-
sets, and patent commercialization performance. We test our
arguments on Taiwanese ?rms with biotechnological or pharma-
ceutical patents.
The results demonstrate that both capability to create in-
novations with appropriability and capacity of complementary
assets correlate positively with ?rms' patent commercialization
performance. The results con?rm the PFI framework. The result
related to the effect of appropriability suggests that ?rms must
enhance their capabilities in developing technologies with high
appropriability. Although laws offer exclusive rights to granted
patents, they cannot prohibit other ?rms from imitating or using
the patents by design around. Firms can achieve success in
commercializing patents only by obtaining patents with high
appropriability, thus further increasing economic return, enlarging
market share, and sustaining competitive advantages.
The signi?cant positive effect of complementary assets on pat-
ent commercialization performance indicates that commercializing
patents is not an independent activity; rather, ?rm performance
correlates with the establishment of complementary assets
necessary for commercialization. Complementary technologies,
quali?ed human resources, supporting services, and suf?cient
promotion channels are necessary assets to commercialize ?rms'
patents.
Market sensing capability's moderating effect on the relation-
ship between appropriability and patent commercialization per-
formance is not statistically signi?cant; thus, it does not in?uence
the effect of appropriability on patent commercialization perfor-
mance. Accordingly, given their level of market sensing capability,
?rms can manage commercialization on the basis of their patents'
appropriability level. The ?nding that market sensing capability
signi?cantly positively moderates the relationship between com-
plementary assets and patent commercialization performance
suggests that ?rms with suf?cient complementary assets can
bene?t more from market sensing capability than those without
them. When ?rms can assess complementary assets required for
commercializing their patents, their strong market sensing capa-
bility allows them to rapidly and accurately gather and interpret
market knowledge and to recognize emerging opportunities
matching their patents and complementary assets, thereby
enabling them to achieve higher commercialization performance.
5.2. Implications
This study emphasizes the factor effects derived from the PFI
framework and dynamic capabilities on the performance of patent
commercialization; thus, our ?ndings can advance new perspec-
tives on dynamic capability and patent commercialization for
academia. In the dynamic capability framework, appropriability
and complementary assets relate to the decision for seizing op-
portunities, and market sensing capability is a key element of
sensing capabilities. They are foundations to form ?rms' dynamic
capability. The results of this study provide some evidence that the
interactions between seizing and sensing capabilities enable ?rms
to outperform others in patent commercialization, and thus to
enhance their sustained competitive advantage.
Previous studies analyzing the performance of patent
commercialization typically focused on patent-level or technology-
level factors, which imply the following three conditions: one
commercialized product comprises one underlying patent, the
knowledge content among patents is independent fromothers, and
the successes in commercializing patents are unrelated to organi-
zational capabilities. To overcome the aforementioned drawbacks,
this study connects the in?uencing factors to ?rm-level organiza-
tional capabilities, demonstrating a new viewpoint to examine the
performance of patent commercialization.
Moreover, this study addresses implications for patent man-
agement. Our ?ndings suggest that, to achieve high performance in
commercializing patents, patent management practitioners must
facilitate ?rms' patenting innovations with high level of appropri-
ability, acquiring complementary assets required for commerciali-
zation, enhancing ?rms' market sensing capability, and ensuring
interactions between their market sensing capability and their
seizing capabilities, and making decisions based on their controlled
complementary assets.
To obtain the bene?ts of interaction between market sensing
capability and seizing capabilities, ?rms can establish patent
management practices that integrate and coordinate patent-related
resources and information across functional boundaries, including
patent generation (research and development), protection (legal),
and utilization (market and business development) activities, and
balance specialization within activity and coordination between
activities to extract the value fromtheir patents. Firms not only rely
solely on their own IP creation, but also scan the market environ-
ment for complementary IPs and assets to ?ll gaps in their patent
portfolios, seize commercialization opportunities, and satisfy
customer needs.
Regarding to future research, the returned questionnaires sug-
gest that most ?rms implemented patents in their own processes or
products, whereas few licensed out their patents. Therefore, the
?ndings and conclusions in this study more appropriately explain
the relationships for ?rms that implement patents in their own
processes or products. Future research can select industries or
countries where ?rms more commonly license out their patents,
and in that context, examine the relationships among appropri-
ability, complementary assets, market sensing capability, and pat-
ent commercialization performance.
Con?icts of interest
All contributing authors declare no con?icts of interest.
Acknowledgement
The authors thank the support of National Scienti?c Council of
Taiwan to this work under Grant No. NSC 100-2410-H-415-029-
MY2.
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