Impact of Technology Recombination on Construction Firm Performance: Evidence from Chinese Construction Sector

Abstract

Technological recombinant innovation (TRI) has been regarded as an important part of technological innovation in the construction industry. However, the pattern of how TRI affects the performance of construction firms is still unclear. Building upon architectural innovation, this study identifies the exploratory and exploitative TRIs and explores the mediating mechanism of business models, by which TRIs influence a firm’s performance. Using text mining, panel data analysis of 107 China-listed construction firms was conducted to analyze the relationships. The results show that the positive relationship between exploratory TRI and firm performance is weakened by novelty-centered business model, while the negative effect of exploitative TRI on firm performance is strengthened through its mediation. This research enriches the literature on the relationship between technological innovation and firm performance by highlighting the important role of TRIs in predicting firm performance and differentiating mediating mechanisms for the two types of business models. In addition, the application of text mining to quantitatively evaluate the types of business model from the annual reports of listed construction firms, provides a new quantitative evaluation method for the research of business models. This study discusses the necessity of recombinant innovation as the source of technological innovation for construction firms, and provides guidance for construction firms in regards to their technological innovation approaches. Firms should focus on exploratory recombinant innovation, actively incorporating external technological components and exploring the new combinations of internal technological components. In terms of exploitative technology recombination, the reuse of existing technology combination may lead to knowledge solidification, which leads to the continuous decline of firm performance. Therefore, firms should pay attention to the balance and interaction of exploitation and exploration. Additionally, since the negative mediating effect of the novelty-centered business model has on the relationship between technological recombinant innovation and firm performance, firms should be mindful about the business model they employ. Adopting novelty-centered business model can be risky for construction firms that are in slow clockspeed industries. Instead, the best way for construction firms to keep thriving is by focusing on their efficiency-centered business model which can help them remain stable by protecting existing resources and competitive actions to maintain a competitive advantage.