Abstract: Under the trend of increasingly fierce dynamic competitive environment, accelerated technological updates, and strengthened innovation synergy, it is urgent for enterprises to integrate diversified technologies to conduct their new product R&D and manufacture. It is also a plausible way for enterprises to gain competitive advantages using unique and differentiated products, in coping with the challenges emerged from producing multi-tech products, implementing complicated processes as well as faster product update speed. To scan from outside the enterprise, the emerging of new technological and industrial evolution aggravates the environmental uncertainty, which forces enterprises to keep on learning new technologies and broadening their own technology scope, in order to survive other than being replaced. In such context, technological diversification strategy characterized by various knowledge bases has been highly emphasized in academia and practice.However, existing researches on the relationship between technological diversification and innovation performance have mixed findings, resulting in positive, negative and also non-liner relationships. This paper argues that, the main reasons for above inconsistent results lie in the following two aspects. 1) Previous researches failed to distinguish different technological diversification type, while each type has its own characteristics and thus fits particular application situations. Following this line of reasoning, technological diversification is further divided into two types in this paper, which are technological breadth and depth diversification. Their impact on innovation is further analyzed in-depth and respectively. 2) Although existing analyses have verified the impact of technological diversification on innovation performance from various perspectives, the influencing mechanism is still unclear. The role of technological diversification on innovation performance is not “taken for granted”, as diversified technologies cannot transform automatically to promote innovation. Either the evolution of knowledge diversification or the increasing of technology scope and domain are both the dynamic process of knowledge accumulation, which requires effective knowledge absorption and utilization. In order to explore the underlying mechanism, two constructs from organizational capability perspective are introduced in this paper, which are absorptive capability and technology integration capability, to reveal their different mediating role on the relationship between technological diversification and innovation performance.Based on above analysis, this paper establishes following theoretical framework of “technological breadth and depth diversification - absorptive capacity and technology integration capability - innovation performance” from knowledge-based theory and organizational capability perspective. The regression results utilizing data from 303 manufacturing companies listed in Shanghai and Shenzhen stock markets show that: 1) both technological breadth diversification and technological depth diversification positively impact on innovation performance significantly; and 2) absorptive capability and technology integration capability have different mediating impact on the main effect, specifically speaking, technological breadth diversification mainly promotes innovation performance through absorptive capacity, while technological depth diversification primarily influences innovation performance via technology integration capability.This paper has following theoretical implications. First, previous research regarded technological diversification as a whole and explored its impact on innovation performance, which led to conflicting conclusions. This paper deepens the distinct influencing mechanism by subdividing technological diversification into two types, namely technological breadth diversification and technological depth diversification, exploring their effect on innovation in detail. The two technological diversification modes discussed in this paper deepens the various influencing situations technological diversification can have on an enterprise.Second, existing researches on the influence of technological diversification on innovation performance have yielded meaningful results. However, it still lacks in-depth analysis on the mechanism in between. To fill this gap, absorptive capability and technological integration capability are analyzed as mediations impacting on the main effect between technological diversification and innovation performance. With this effort, this paper enriches mediation mechanism from organizational capability perspective.Third, in the process of mediation mechanism analysis, this paper explores both absorptive capability and technology integration capability’s mediating role on two technological diversification modes’ influence on innovation performance. To be more specific, absorptive capability and technology integration capability’s mediating role are compared, improving the research on technological diversification and innovation performance.This research also has critical managerial implications for enterprises to establish competitive advantage. First of all, there is now a developmental trend for manufacturing enterprises to expend their technology bases and scope to better respond to the challenges of environment uncertainty and product complexity. With the context of complicated technologies and synergetic innovation, traditional manufacturing mode is hard to sustain. To get out of this “low-end lock-in” dilemma and further make it to realize the transformation from “Made in China” to “Created in China”, manufacture enterprises need to accumulate diversified innovation technologies, and nurture innovation capability based on synergetic development of above technologies.Secondly, during its implementation of diversification technology strategy to acquire sustainable competitive advantages, manufacture enterprises need to choose suitable technology diversification mode to fit their own situations, avoiding falling into the “diversification in blind” trap. Technology diversification can be subdivided into technology breadth diversification and technology depth diversification, and/or other classifications. Thus, an enterprise needs to distinguish and recognize its own innovation direction and technology position clearly, thus to timely choose suitable technological diversification mode matching its own situation, and align its innovation resources properly.Thirdly, manufacture enterprises need to emphasis on the fitness of different technological diversification mode and its own capability, to make full use of its technology diversification strategy. The breadth and depth dimension of technological diversification have different influencing mechanism on innovation performance, which inspires enterprises to conduct various knowledge activities to build its absorptive capability and technology integration capability based on their own technology traits, in order to better absorb and integrate knowledge in various domain and achieve higher innovation performance.

Key words: technological breadth diversification, technological depth diversification, absorptive capacity, technology integration capability, innovation performance