Three essays on innovation and entrepreneurship: Diversification, boundary expansion, and differentiation

Sang Kyun Kim

doi:10.7273/000006193

This dissertation investigated the topics of innovation and entrepreneurship. The first essay discusses the relationship between diversification and innovation by integrating the insights of organizational search and contingencies literatures. The main argument is that a strategic fit between diversification and organizational contingencies leads to higher technological innovation. We find that a related diversification strategy leads to higher innovation when a local search is used by the company. In contrast, an unrelated diversification strategy leads to higher innovation when a broader search is used. Further, this study shows that technological capital is importance factor for a diversified firm to take an advantage of benefits from broader corporate scope. The second essay explores young firms boundary expansion activities to develop its capabilities. Firms may differ in their search and renewal strategies based on their stage in the life cycle. Unlike the incumbents, young firms that just went through Initial Public Offering (IPO) may use different strategies contingent on their unique resources and the liabilities. Built on Resource Based View (RBV), we find that young firms with R&D resources develop an internal factor market to develop its competencies, while young firms with financial resource prefer to engage in boundary expansion activities. We also find that young firms boundary expansion activities are further constrained in the presence of environmental uncertainty, and strong competition in the industry. Finally, the third essay investigates the performance consequences of new venture s strategic differentiation. We address how the patterns of differentiation affect the new venture s short-term and long-term performance after going public. The main argument is that firms using a differentiation strategy will have higher performance than those with similarity strategy. Empirical support for the argument is found in the high technology industry. Additionally, the results show that in the IPO context, strategic differentiation is more beneficial under high uncertain environment. Overall, the three essays in this dissertation 1) provide a more refined view of the relationship between diversification strategy and innovation, 2) explain young firms strategic choice to develop a capability, and 3) discuss the strategic behavior of new ventures and its implication for performance after IPO.

Three essays on innovation and entrepreneurship: Diversification, boundary expansion, and differentiation

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