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Coherent diversification in corporate technological portfolios.
Emanuele Pugliese1,2,3, Lorenzo Napolitano1,4, Andrea Zaccaria1,2
1Istituto dei Sistemi Complessi (ISC)-CNR, UOS Sapienza, Rome, Italy.
Plos One
|October 11, 2019
Summary
Firms with more coherent technological portfolios show better labor productivity. This suggests that focused innovation, rather than broad diversification, drives economic performance and efficiency.
Area of Science:
- Complexity Science
- Economics
- Innovation Studies
Background:
- Understanding the link between firm technological portfolios and economic performance is crucial for strategic decision-making.
- Existing research often overlooks the structural coherence of technological diversification.
Purpose of the Study:
- To investigate the relationship between the coherence of a firm's technological portfolio and its labor productivity.
- To develop a novel measure for corporate coherent diversification.
Main Methods:
- Analysis of balance sheets and patenting activity for approximately 70,000 firms (2004-2013).
- Utilized complexity science tools, specifically bipartite networks, to define and measure corporate coherent diversification.
- Related the diversification measure to firm labor productivity.
Main Results:
- A statistically significant positive relationship was found between coherent diversification and firm labor productivity.
- The measure of coherent diversification captures relevant information about a firm's productive structure beyond mere size.
- Naive measures of technological diversification are insufficient, primarily reflecting size and coherent diversification.
Conclusions:
- Coherent technological diversification is a key driver of firm economic performance and productive efficiency.
- The developed measure offers insights into internal firm synergies and potential merger and acquisition targets.
- Complexity science provides valuable tools for analyzing firm innovation strategies and performance.
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