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Dynamic Technological Diversification and Its Impact on Firms’ Performance: An Empirical Analysis of Korean IT Firms

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  • Sang Ho Kook

    (Graduate School of Management of Technology, Korea University, Seongbuk-gu, Seoul 02841, Korea)

  • Ki Hong Kim

    (Graduate School of Industrial Management Engineering, Korea University, Seongbuk-gu, Seoul 02841, Korea)

  • Chulung Lee

    (Division of Industrial Management Engineering, Korea University, Seongbuk-gu, Seoul 02841, Korea)

Abstract

This paper aims to analyze the influence of the technological diversification on a firm’s innovation capabilities and investigates the effect of various strategies on the firm’s financial performance in a technology-oriented environment. We employ the entropy measurement to calculate technological diversification with 2095 patents, which are applied from years 2009 to 2011 by 507 firms that have participated in Korean government Information Technology (IT) Research and Development (R&D) supporting programs. In our framework, a firm should not diversify among the related technology fields, but should concentrate on a specific technology to reinforce the competitive advantage. However, in the case of the firms with sufficient resources, increasing technological diversification among the unrelated technology fields plays a key role on the firms’ performance. Furthermore, the degree of the technological diversification should be adjusted dynamically in compliance with the change of a firm’s innovation capabilities. Therefore, these results suggest that a firm should develop differentiated competitiveness through specialization by prioritizing its capabilities, and then exploit unrelated technological diversification to search for new opportunities.

Suggested Citation

  • Sang Ho Kook & Ki Hong Kim & Chulung Lee, 2017. "Dynamic Technological Diversification and Its Impact on Firms’ Performance: An Empirical Analysis of Korean IT Firms," Sustainability, MDPI, vol. 9(7), pages 1-16, July.
    • Handle: RePEc:gam:jsusta:v:9:y:2017:i:7:p:1239-:d:104836
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    Cited by:

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    2. Parraguez, Pedro & Škec, Stanko & e Carmo, Duarte Oliveira & Maier, Anja, 2020. "Quantifying technological change as a combinatorial process," Technological Forecasting and Social Change, Elsevier, vol. 151(C).
    3. María A. Ramón-Jerónimo & Inés Herrero, 2017. "Capturing Firms’ Heterogeneity through Marketing and IT Capabilities in SMEs," Sustainability, MDPI, vol. 9(12), pages 1-25, November.
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    6. Zefeng Mi & Yongmin Shang & Gang Zeng, 2022. "The impact of knowledge base on technological innovation of emerging industries from the perspective of related variety: A case study of China’s fuel cell industry," Growth and Change, Wiley Blackwell, vol. 53(1), pages 57-75, March.

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