Determinants of Technological Diversification in Small Serial Innovators

This paper analyses the determinants of technological diversification for small innovative companies. Using patent data from the PATSTAT database for the period between 1990 and 2006, we explore technological diversification through a panel data set comprising 811 UK based serial innovators characterized by a sustained record of innovations over time, accounting for more than 66000 patents. The literature on diversification has usually focused the analysis on corporations and large firms since small companies are likely to be excluded from strategies of technological diversification due to resource limitations. Differently, from this literature, we focus on the reasons that bring small innovative firms to engage in the costly process of technological diversification. In particular, we analyse the trade-off that is likely to take place between the need to explore new technological opportunities and the significant element of path dependency delineated by the specific core technological competencies that usually characterise small innovative companies. We find that increasing technological opportunities present an inverted U type relationship with diversification, while technological trajectories defined by coherence in both technological search and core competencies support specialization