The impact of technological diversification on firm performance : mechanical, institutional and optimal distinctiveness views

Chinese firms are experiencing a rapid increase in technological diversification, which is referred to as maintaining their capabilities in multiple technologies. However, the research on the relationship between technological diversification and firm performance is inconclusive. This PhD thesis tries to re-investigate the technological diversification-firm performance relationship from three different perspectives using data on Chinese listed firms from 2003 to 2014. First, the thesis tries to overcome the shortcomings of previous technological diversification research by unpacking technological diversification into explorative and exploitative technological dimensions from the mechanical view and studying their roles in firm performance. The findings suggest that technological diversification that combines explorative and exploitative dimensions is positively related to firm performance. This relationship is conditional on intangible complementary assets and firm type (high or low-tech firms). Second, this thesis tries to investigate the technological diversification-firm performance relationship through an institutional view that has hardly been mentioned in the previous literature. Here it is argued that firms try to use technological diversification as a way to gain legitimacy. In order to do so, firms' technological diversification need to be similar to the industrial norms. The results reveal a positive relationship between firms' conformity in technological diversification and their performance. The results further delineate the boundary conditions that influence this relationship. While environmental dynamism strengthens the conformity-performance relationship, environmental munificence reduces it. Finally, this thesis tries to integrate both a mechanical view and an institutional view of technological diversification and find evidence to support the optimal distinctiveness view that firms should reach a balance between these views. The results reveal a curvilinear (inverted U-shaped) relationship between firms' conformity in technological diversification and their performance. I also test the boundary conditions of this relationship. While firm age strengthens the conformity-performance relationship, state ownership weakens it.