Nonlinear Effect of Technological Diversification on the Corporate Patent Performance

Abstract

Technological diversification has positive influence on corporate performance, however, previous studies have only presumed as a linear relationship. As business environment nowadays has became more dynamic and uncertain, it is important to explore the possible non-linear relationship between the technological diversification and its consequents. This study uses panel negative binomial fixed effect model to explore the nonlinear relationships between technological diversification and corporate patent performance. The result indicates that technological diversification has nonlinear effect of which an inverted U-shape on the corporate patent performance. Technological diversification is positively related with corporate patent performance when the value of technological diversification is below the critical point and vice-versa. This finding has important implication for corporate management.