Innovative competence, exploration and exploitation: The influence of technological diversification

This paper investigates how technological diversification influences the rate and specific types of innovative competence. We test a set of hypotheses in a longitudinal study of a sample of biotechnology firms. Our findings provide strong support for the premise that a diversified technology base positively affects innovative competence. Furthermore, technological diversification is found to have a stronger effect on exploratory than on exploitative innovative capability. This empirical evidence suggests that technological diversity may mitigate core rigidities and path dependencies by enhancing novel solutions that accelerate the rate of invention, especially that which departs from a firm's past activities.