Measuring firm's technology diversification: An example from Herfindahl-Hirschman Index
Date Issued
2011
Date
2011
Author(s)
Tsui, Yung-Hsu
Abstract
Hall (2005) and Chen, et al. (2010) have discovered that it is easily getting a bias result when using Herfindahl-Hirschman Index (HHI) to measure the technology concentration of small-patent-scale firms.
In order to understand how serious the bias is, we established a method to calculate the bias. We have shown that we could distinguish the technology portfolio of firms, whether it is able to be unbiasedly measured by HHI or not, through two new indicators we developed, HHI-error distance and HHI-error ratio, by adapting the real patent data from two semiconductors companies, Qualcomm and Mediatek.
Furthermore, we have constructed a new index, Herfindahl-Hirschman Transformed Index (HHT) to measure the technology portfolios of small-patent-scale firms. We have shown that HHT could unbiasedly measure the technology concentration of small-patent-scale firms.
Subjects
technology diversification
technology specialization
technology concentration
Herfindahl-Hirschman Index
Herfindahl-Hirschman Transformed Index
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