The moderating role of design innovation in the relationship between technology complexity and firm performance

Abstract

In todays highly competitive markets, firms can no longer ensure competitive advantage through the development of highly complex technologies or differentiation based solely on technological and functional factors. Simultaneously, there is growing recognition that design and aesthetic factors can contribute to firms competitive advantage. Hence, this study examines the relationship between technology complexity, design innovation, and firm performance to uncover the role of design innovation in exploiting complex technologies. Our main hypothesis is that design innovation positively moderates the negative effect that technology complexity has on firm performance. We used a unique dataset that aggregates all patent data published by US-headquartered publicly-traded firms to the parent company level. We combined this dataset with the Computat and PATSTAT databases based on their matching firm identifier. Focusing on 1,743 firms from 1980 to 2015, the results support our hypotheses. This study contributes to the resource-based view of firms by recognising design as a strategic resource that firms can utilise to gain a competitive advantage, especially in the presence of high technology complexity.