Search behavior of the diversified firm: The impact of fit on innovation

Authors

  • Sang Kyun Kim,

    Corresponding author
    • Department of Management and Information Sciences, College of Business, University of Southern Indiana, Evansville, Indiana, U.S.A.
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  • Jonathan D. Arthurs,

    1. Department of Management, Information System, and Entrepreneurship, College of Business, Washington State University, Pullman, Washington, U.S.A.
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  • Arvin Sahaym,

    1. Department of Management, Information System, and Entrepreneurship, College of Business, Washington State University, Pullman, Washington, U.S.A.
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  • John B. Cullen

    1. Department of Management, Information System, and Entrepreneurship, College of Business, Washington State University, Pullman, Washington, U.S.A.
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Correspondence to: Sang Kyun Kim, Department of Management and Information Sciences, College of Business, University of Southern Indiana, Evansville, IN 47712, U.S.A. E-mail: skim10@usi.edu

Abstract

This paper provides a new approach to account for the relationship between diversification and innovation by integrating insights concerning strategic fit. We argue that the type of diversification strategy leads to greater innovation output when the appropriate technological search strategy is employed. Using a longitudinal study of the patenting activity of 258 manufacturing firms, we find that strategic fit is important for innovation output. More specifically, a related diversification strategy leads to greater innovation when firms use a narrow technological search strategy. In contrast, an unrelated diversification strategy leads to greater innovation when a broader technological search strategy is used. Implications for future research are discussed. Copyright © 2013 John Wiley & Sons, Ltd.

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