Please use this identifier to cite or link to this item: http://scholarbank.nus.edu.sg/handle/10635/20429
Title: Impacts of a firm's technological diversification on product diversification and performance
Authors: LE MANH DUC
Keywords: technological diversification, product diversification, firm performance, patent
Issue Date: 13-Aug-2010
Source: LE MANH DUC (2010-08-13). Impacts of a firm's technological diversification on product diversification and performance. ScholarBank@NUS Repository.
Abstract: In this study, I investigate the impact of technological diversification (i.e., the phenomenon that firms expand their technological bases into a diverse range of technical fields) on the firm?s product diversification. Based on the RBV (resource-based view) framework about dynamic economies of scope, I argue that the nature of the relationship between technological diversification and product diversification is essentially bidirectional. Specifically, technological diversification positively influences product diversification but at a decreasing rate and vice versa. To test my arguments, I used patents granted by the United States Patent and Trademark Office to represent technologies of a sample of firms extracted from the COMPUSTAT database from 1984 to 2000. Applying a dynamic panel data framework developed by Holtz-Eakin et al. (1988) and Arellano and Bond (1991) to test the dynamic and bidirectional relationship between technological diversification and product diversification, I have found that technological diversification exhibits an inverted U-shaped relationship on product diversification and vice versa. However, the impact of technology on business diversification has a time lag of two years while the impact of product diversification on technological diversification shows a one year lag. I proposed but did not find support for any moderating effect of technological interdependency (i.e., the inherent interrelation between multiple technological areas in a firm?s knowledge base) on the relationship between the firm?s technological and product diversification. I further proposed and found evidence of an inverted U-shaped relationship between technological diversification and firm financial performance. Technological diversification is beneficial to a firm by improving its absorptive capacity to integrate external technologies for development of new strategic innovations and commercialize them successfully. However, with high levels of technological diversification come greater complexity in management, which taxes the ability of the firm to diversify its product portfolio and harms its performance. Moreover, I also found that the performance gains attributable to a given level of technological diversification can vary in their magnitude in accordance with the level of the firm?s product diversification.
URI: http://scholarbank.nus.edu.sg/handle/10635/20429
Appears in Collections:Master's Theses (Open)

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