The Impact of Patent Acquisition and Technology Import on the Abnormal Returns of Korean Export Manufacturing Firms

Export and manufacturing have played an important role in the Korean economy, and their significance has risen since the outbreak of the pandemic in 2019. Considering the significance of export manufacturing companies in the Korean economy, this paper investigates how innovative activities affect their corporate performance. Among various types of innovative activities, patent acquisition and technology import are chosen for this study, based on the notion of exploration and exploitation by March (1991) and the classification criteria developed by Atuahene-Gima (2005). Announcements on patent acquisition and technology import made by 658 export manufacturing companies listed in KOSPI and KOSDAQ for the period 2001-2020 are analyzed through the traditional event study analysis. To provide a more comprehensive and precise view of the relationship between the innovative activities and corporate performance, this study also incorporates seven firm characteristics and adopts Sundaram, John, and John (1996)’s Competitive Strategy Measure framework, which evaluates the competitive nature of the market a firm belongs to. According to the framework, if competitors accommodate an innovative activity of a firm in the same market, the market is considered to be in “strategic substitute” competition, and the performance outcome of the activity is enhanced. On the contrary, if competitors respond aggressively, the market is in “strategic complement” competition, and that of the innovative activity of the focal firm is diminished. The results of this paper indicate that announcements on patent acquisition and technology import both affect the abnormal returns of the announcing companies positively. Moreover, it is found that strategic substitute competition has a greater positive impact on the abnormal returns gained by Korean export manufacturing companies in response to their announcements on patent acquisition and technology import. Lastly, the firm characteristics are found to have varying impacts on the abnormal returns gained in response to the innovative activities.