The dependent variable in this study is a firm’s innovation performance. Prior studies measure innovation performance in a number of different ways, such as patent or scientific publications. Since patent
data are relatively easy to access and Taiwan’s manufacturing firms generally patent their innovative products or improved manufacturing processes, this study uses patent stock to measure a firm’s innovation performance. In order to create a timelag between independent and dependent variables, this research calculates patent stock by the total number of patents on the basis of patent applications date (Almeida & Phene, 2004) between 2003 and 2005 while the independent variables are at the time before 2003. This research uses application date rather than issue date since firms might have already developed and used such technologies or products as they apply for patents. This research codes the patent number of the sample firms from the TIPO, the Taiwan’s governmental patent database.