The purpose of this study is to discuss the effects of temporal technological diversification on firm performance. Prior research has mainly addressed the effects of spatial dimension, of geography or globalization, as regards technological diversification on firm performance. However, previous research suggests that temporal dimension in technological diversification also affects firm performance. Here, temporal dimension is defined as the rate of change in technology.
Two mechanisms are examined in this study. One is Top Management Team(TMT)'s information processing load. Existing research shows that effective technology management depends on the temporal dimension of that technology. Therefore, when TMT handles temporally different technology, the information process loads increase. The other is coordination cost. Research on diversification shows that related diversification increases firm performance but coordination cost decreases it. Because temporally different technology increases coordination cost, related but temporally different technology decreases firm performance.
Using 12 chemical companies as the sample, we test the effects of temporal technological diversification on firm performance. The results show that (1) the effects of temporal technological diversification on performance are mixed and (2) the cost of temporal technological diversification exceeds the benefit of related technological diversification.