Strategic similarity in the co-evolution of technological and business diversification for firm growth: Evidence from smart-manufacturing related firms

Abstract

The reflection of external firms' strategies enables a firm to optimize its evolutionary processes that keep a balance between path-dependent and self-renewing evolution. This study employs firm-level strategic similarity and defines it as the extent to which a firm's technological or business profile resembles those of other firms. The study investigates the role of firm-level strategic similarity in the co-evolutionary relationship of technological and business diversification for firm growth. To this end, it constructs a panel dataset of applicant firms obtaining granted patents of smart-manufacturing technologies during 2010–2019 from the U.S. Patent and Trademark Office. The results show that a firm's strategic similarity is a significant driving force of the variation of technological and business profiles through diversification within the firm. Particularly, the firm's business strategic similarity is the imperative determinant of the co-evolutionary path through technological and business diversification for firm sales growth. The findings suggest firm-level strategic similarity plays a critical role in the firm's evolutionary paths to balance between exploitative and exploratory innovation for firm growth.