The utilization of patent quantity and quality for firm profitability in the western European electronics manufacturing sector during 2016–2024

While existing literature establishes that patent quality drives firm performance better than mere patent counts, the boundary conditions of this consensus remain underexplored under severe macroeconomic stress. This study investigates the relationship between patent quantity and quality and firm profitability – in terms of return on assets (ROA) and return on equity (ROE) – within the strategically vulnerable, capital-intensive Western European electronics manufacturing sector over the 2016–2024 period. Using the European Patent Office’s PATSTAT database and EMIS, we analyse a panel of 112 firms via two-way fixed-effects regressions to test how extreme economic disruptions impact innovation premiums. Our baseline findings confirm that under stable macroeconomic conditions, patent quality – measured by average forward citations – acts as a robust exogenous driver of operating and equity profitability, whereas sheer patent quantity does not. Crucially, however, we demonstrate that the systemic post-2020 economic shock and subsequent disruptions completely neutralised this established quality premium. This study provides a novel theoretical contribution by showing that the superiority of high-quality intellectual property is not absolute; rather, it is strictly contingent upon stable macroeconomic environments. By highlighting these vulnerabilities, our findings offer critical insights into the limitations of patent-driven profitability during periods of systemic economic uncertainty.