Does technological diversification matter to firm performance? The moderating role of organizational slack

Abstract

The first decade of the twenty-first century has witnessed a significant increase in technology strategy research related to innovation capacity and technological diversity. Recent studies in the field of innovation capacity investigate whether the underlying performance differential among firms is attributable to organizational slack resources. However, few scholars have examined the relationship between corporate technological diversification and firm performance with the moderating effect of organizational slack. In acknowledging the increasingly important role of the Taiwanese smart phone sector, this study follows the contingency approach to explore the impact of a strategic orientation toward corporate technological diversity on Taiwanese smart phone firms' performance in the context of different organizational slack conditions, absorbed and unabsorbed slack resources. The results of hypothesis testing confirm the existence of a significant and negative relationship between technological diversification and firm performance in terms of Tobin's q and MVA, but not of ROA and EVA. In addition, the organizational slack of a company moderates the relationship between technological diversification and firm performance in terms of EVA and MVA, but not of ROA and Tobin's q. The current findings indicate that Taiwanese smart phone firms adopting a different approach to technological diversity could utilize different slack resources to improve their firm performance. Based on different types of slack resources, the current results of different moderating roles of organizational slacks in affecting firm performance support the predictions of technological diversity and organizational theory.