Abstract:
This paper analyzes how competitive intensity impacts diversification and influences the relationship between diversification and firm performance for firms in technology intensive environments. Using data on firms in technology intensive industries in the UK manufacturing sector, this study shows that for firms in technology intensive industries, competitive intensity is negatively related to diversification. At higher levels of competitive intensity, competitive intensity negatively moderates the relationship between diversification and performance. These findings suggest that in technology intensive environments firms’ diversification behaviors and outcomes are strongly affected and constrained by the competition they face. This contributes towards clarifying the role competition plays in diversification decisions.
