Why do inconsistencies occur? Detangling the relationship between technological diversification and performance in Chinese firms

Abstract

This paper proposes and investigates three potential reasons (dimensions, capability order and contingency of technological diversification) which may explain why there are inconsistencies in the findings of studies on the relationship between technological diversification and firm performance. The results indicate that: (1) a more comprehensive definition is necessary, which combines the two dimensions of technological diversification (breadth and depth), which are positively linked to firm performance; (2) in low-tech firms, technological diversification serves as a higher-level capability resulting in higher performance; however, in high-tech firms, technological diversification serves as a zero-level capability that does not contribute to firm performance and (3) intangible complementary assets negatively moderate the relationship between technological diversification and performance. Further research should consider the two dimensions to reach a more comprehensive understanding of technological diversification. Firms should increase both the depth and breadth of their technological diversification to enhance performance.

KEYWORDS:

• Technological diversification
• depth
• breadth
• firm performance
• complementary asset

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Xin Pan is a PhD candidate at Queen Mary University of London. His research interests focus on R&D internationalization, and regional innovation systems. He has previously published in the Journal of Technology Transfer, Scientometrics, Technovation, Management Decision and Technological Forecasting and Social Change.

Xuanjin Chen is a PhD candidate at Tsinghua University. Her research focuses on the area of international technology management and innovation and business strategy in an emerging market context.

Lutao Ning is a Reader in International Business at the School of Business and Management, Queen Mary University of London. His research focuses on the areas of international technology management and innovation, and business strategy in the emerging market context. He has previously published in journals such as Research Policy, Technovation, International Business Review and Regional Studies.

Notes

1. We appreciate one reviewer’s suggestion.

2. Revised in 2012. In the 2012 version, a new industry code was constructed that was different from the 2001 version. However, CSMAR provides both codes for listed firms. We thus use the 2001 industry code to identify high- and low-tech firms.

3. More recent adoptions should also see Ellis (2011), Gruber, MacMillan, and Thompson (2013), and Kistruck, Morris, Webb, and Stevens (2015).

4. We appreciate one reviewer’s this comment.