The transition from bias-ply technology to radial design for passenger tires and the
changing fortunes of one of America’s best known industrial centers provide a rich historical
example of environmental and technological changes that had a profound impact on
incumbent firms in a mature industry. These changes in the industry provide the backdrop
to our analysis of Goodyear’s patents. Below, we dig deeper into the innovation responses of
Figure 1 depicts the cumulative number of utility and design patents over the period
1975-2005, combined with the number of new patent applications[4]. The cumulative
number of patents steadily increases throughout these years, demonstrating the firm’s
consistent commitment to technological progress. The trend of new patent applications
is also mainly positive, although it shows a slight decline in the latter part of the 1970s
and in the early 1980s. It could be argued that the slowdown of Goodyear’s innovation in
this period is at least partially related to the complexity of catching-up with the radial
breakthrough. Throughout the 1980s, the number of patent applications remained
relatively constant, in line with the findings of previous studies of decline in the
US-based tire industry over this period (Sull, 2001). In 1995, the innovative performance
of Goodyear took off as the firm sought to revive its firm’s knowledge-based capabilities
by renewing its patent portfolio, which by that time had started to shrink due to the
increasing number of patents getting close to expiration. Figure 1 shows that from 1996
onwards the number of new patent applications is substantially higher than the number
of expired patents, indicating the growth of Goodyear’s innovation portfolio. Hence,
while its competitors were collapsing in the face of technological changes and takeover
threats, the company engaged in the build-up of a solid base of technological capabilities
that enabled it not only to react to the major changes spurred by the radial revolution but
also to push the technological threshold in its industry.
A comparison between the dynamics of new patent applications and the company’s
financial performance offers additional insights into the firm-level conditions under
which Goodyear’s innovation trajectory developed and influenced its competitive
advantage. Table II demonstrates that while innovation shows an increasing trend, the
company’s R&D/Sales ratio remains quite stable, indicating an increase in R&D
productivity. Moreover, the positive pace of new patent applications was sustained