Examining the effect of technology-related divestitures on exploratory innovation: evidence from China

Abstract

PurposeThis study aims to test the effects of Technology-related Divestitures (TRDs) on firms' exploratory innovation. The moderating effects of firms' internal and external resource coordination activities, resource buffering and bridging, are also explored.Design/methodology/approachA set of data including 1,372 Chinese listed firms from 2009 to 2018 is adopted. Based on propensity score matching sample, random-effect Tobit models were employed to test the hypotheses.FindingsThe empirical results indicate that TRDs inhibit firms' exploratory innovation, while both resource buffering and bridging can mitigate this negative effect. This implies that to promote exploratory innovation, resource coordination activities are the essential.Originality/valueThe research findings can contribute to both the exploratory innovation and technological divestiture literature. The test on the moderating roles of resource buffering and bridging can also extend our understanding of the effect of TRDs on firms' exploratory innovation. Accordingly, several practical implications can be provided. This is especially important for strategic decisions of firms from emerging and developing countries, which often lack sufficient internal resources and strong technological capabilities to develop exploratory innovation.