Technological Diversification to Green Domains: Technological Relatedness, Invention Impact and Knowledge Integration Capabilities

Abstract

Climate changes and ecological challenges often motivate firms to diversify into environmental domains. However, this does not guarantee impactful inventions. Therefore, this study investigates how firms can create impactful environmental inventions based on their technological relatedness and prior knowledge integration capabilities. Using a unique dataset of 1,990 high-tech Chinese firms between 2006 and 2016, our results reveal that diversifying firms’ green technological relatedness has an inverted U-shaped relationship with invention impact. While the depth of firms’ knowledge integration capabilities steepens this relationship, the breadth flattens it. Higher levels of depth capability result in a greater impact, while greater breadth leads to an early attainment of peak invention impact at a lower degree of green technological relatedness. Theoretical and policy implications are discussed.