Patents as Surrogates for Inimitable and Non-Substitutable Resources

This study tests the view that competitive advantage lies in organizational processes and capabilities to secure patents. Since, by definition, patents are valuable and rare, here we test the extent to which patent citations and claims capture, respectively, inimitability and non-substitutability. Focusing on 85 publicly traded pharmaceutical firms (SIC 2834), we find that once the effects of firm size, past performance, and investment in innovation are held constant, inimitability is significantly related to firm profitability and new product introductions. Non-substitutability is significantly related to new product introductions only.