A Study On The Relationship Between Managerial Overconfidence And Corporate Technological Diversification

Technological innovation is the foundation of firms to carry out effective product innovation and increase competitive competence,which drives firms to gain sustainable competitive advantage.With the deepening development of globalization,technology environment and market environment become dynamic and complex,which is great challenge for Chinese firms.Therefore,how to improve the technological innovation competence of Chinese firms,has not only great academic meaning,but also strategic practical value.With the contribution of technological innovation increasingly important in economic growth,more and more firms have paied much attention to the strategies about technology development and acquisition.From the mid-1980s on,a lot of scholars in Japan,Europe and America have attached great importance to a new kind of technological phenomenon——corporate technological diversification.These scholars agree that,as market demand becomes increasingly diverse,complex and dynamic,firms should set up a system of technological knowledge and technological competence with feasible volume and distribution.Technological diversification is a kind of strategy which could effectively help firms cope with the increasingly complex and dynamic environment of technology and market,in order to gain the sustainable competitive advantage.From the 1990s on,with the rise of quantitative analysis methods based on patent data,more and more scholars have carried out the empirical study of technological diversification.The relationship between technological diversification and firm financial performance gains the most attention.The literature has come to a common view,that the relationship between technological diversification and firm financial performance is positive or inverted-U.That is to say,modest technological diversification is the best beneficial to firm financial performance,but overlow or overtop is both harmful.Under this conclusion,This dissertation wants to know how to implement technological diversification strategy,what factors affect the level of technological diversification,how to restrain overtop technological diversificaiton.The literature about the determination of technological diversificaiton lacks how to implement technological diversificaiton from the strategic perspective.Overconfidence is the most reliable conclusion of decision psychology,with the expression of overestimating the probability of success or profit,attributing the reason of success to oneself,or underestimating the probalibity of failure or risk.This dissertation combines Upper Echelons Theory and Schumpeter Entrepreneur Innovation Model and finds the internal relevance between entrepreneurship and managerial overconfidence.So this dissertation introduces managerial overconfidence to analyse its positive influence on technological diversification according to the psychological mechanism and decision preferences of overconfidence manager.What’s more,based on Schumpeter Entrepreneur Innovation Model,technological innovation investment is an important medial section in the process of innovation driven by entrepreneur.This dissertation introduces technological innovation investment as a mediator.Based on Upper Echelons Theory and Dynamic Capability Theory,this dissertation also analyses the moderating effect of board structure(both chairman-CEO separation and ratio of independent directors)and environmental dynamism.With the measurement of technological diversification on authoried invention patent,based on the sample of China’s 189 A-share listed companies in the patent-intensive industries from Shanghai and Shenzhen Stock Exchange from 2007 to 2013,the empirical results show that managerial overconfidence has significant positive influence on technological diversification,which is partially mediated by technological innovation investment.Board structure(both chairman-CEO separation and ratio of independent directors)can effectively weaken the positive relationship between managerial overconfidence and technological diversification in order to avoid over technological diversification which would harm firm performance.Environmental dynamism can effectively strengthen the positive relationship between managerial overconfidence and technological diversification.In a word,based on Upper Echelons Theory,Schumpeter Entrepreneur Innovation Model,the psychological mechanism and decision preferences of overconfidence manager and Dynamic Capability Theory,this dissertation analyses the influence mechanism and action context of managerial overconfidence on technological diversification.The conclusions provide management suggestions for Chinese firms to implement technological diversification strategy under dynamic environment,employ suitable managers,and set up effective board structure.