Abstract: “This paper investigates the effects of technological diversification on innovation and performance by using Korean firm-level data over the period between 2001 and 2009. We improved the conventional CDM model sothat we can consider the relationship among R and D activities, innovation activities, financial performance and technological diversification. In order to examine this relationship we made use of a large sample bymerging different data sets including firms’ financial statements, Korean Innovation Survey data, and patent application information, consisting of 5,861 firms. The empirical results imply a proportional relationship between various activities, as follows: i) technological diversification and R and D activities, ii) innovation activities and R and D efforts, and iii) innovation output, measured by the number of patent applications, and technological diversification. However, the relationship between innovative sales and its technological diversification is found to be”

Keywords: Technological diversification; R&D; innovation; CDM model