Top management team regulatory focus and technological diversification: evidence from China’s high-technology firms

Abstract

PurposeThis study aims to examine the impact of the regulatory focus of the top management team (TMT) members on the technological diversification of firms in high-technology industries based on the upper echelons theory and regulatory focus theory and explore the moderating effect of environmental uncertainty.Design/methodology/approachThis paper uses data on the Chinese Growth Enterprises Market Board (GEM)-listed companies from 2012 to 2016. The authors collected data on TMT regulatory focus from firms’ annual reports by Python programming. A fixed-effects model was used to test our hypotheses.FindingsResults indicate that TMTs with a high promotion focus are associated with greater technological diversification, while TMTs with a high prevention focus are linked to lower technological diversification. Moreover, environmental uncertainty amplifies the positive relationship between promotion-focused TMTs and technological diversification, while it diminishes the negative relationship between prevention-focused TMTs and technological diversification.Research limitations/implicationsThis study is limited to high-technology firms listed on the Chinese GEM, which may restrict the generalizability of the findings. Future research could validate these results in different countries and industries to enhance their robustness. Additionally, this study focuses on the impact of TMT regulatory focus on technological diversification; future studies could explore its influence on other strategic decisions, such as digital transformation or innovation strategies.Practical implicationsThe results suggest that firms should carefully consider the regulatory focus of their TMT when making strategic decisions regarding technological diversification. Boards of directors should ensure that the TMT’s regulatory focus aligns with the firm’s strategic objectives, particularly in high-technology industries. Moreover, firms should adapt their strategies to the level of environmental uncertainty to better navigate the risks and opportunities presented by a dynamic market environment.Originality/valueSupportive evidence allows authors to discuss how our findings contribute to the upper echelons theory, as well as the emerging stream of firm technological diversification, which provided valuable psychological insights into the factors influencing TMT strategic decision-making. Meanwhile, this paper integrates the factors of the industry macro-environment to explore the changes in the TMT regulatory focus on firm technological diversification under different contexts.