This paper discusses the impact of a firm's technology portfolio on its market value. Two concepts are used to characterize a firm's portfolio: the number of technological fields and the degree of relatedness within the portfolio characterized by the amount of joint occurrences of patents in technological fields. Based on a theoretical framework using an expanded Tobin's q approach, it presents evidence for a negative influence of portfolio size on the market value caused by a diminishing potential to make use of economies of scale. This discount can be counterbalanced when the relevant fields share a common technological base which is measured by the degree of technological relatedness.
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number
780.