Research on corporate diversification: A synthesis

Abstract

Diversification has emerged as a central topic of research in strategic management. Although this topic has been widely and intensively studied by scholars from other areas such as industrial organization economics, financial economics, organization theory, and marketing, a synthesis of these diverse streams of research is lacking. This paper attempts such a synthesis with a view to fostering further strategic management research in this area by taking a multi‐disciplinary perspective on diversification. A wide‐ranging search of the literature led to the development of an overarching research framework that facilitates the classification of a vast body of literature. Proceeding from the framework, a critique of the literature is performed with a particular emphasis on studies by strategic management researchers. Five key conceptual and methodological problems are identified and discussed. Suggestions are offered for future research on diversification.

Performance Implications of Firm Resource Interactions in the Acquisition of R&D-Intensive Firms

“…This time frame offered control over known impacts of the business cycle on acquisition activity (Lubatkin et al 1997, Ramanujam andVaradarajan 1989) by ensuring that all measurement was limited to a period of similar economic conditions. Additionally, we restricted our sample to target firms with a market capitalization of at least $10 million.…”

“…Still, a continuing need remains to examine the impacts of acquisition implementation (Ramanujam and Varadarajan 1989) for additional insight into achieving acquisition success. It would be interesting to explore whether the process of selecting a target firm influences integration, and whether an acquirer adjusts its processes or resource redeployment (i.e., integration depth) based on information disclosed through the integration process.…”

The choice of organizational form: Vertical financial ownership versus other methods of vertical integration

“…near perfect labor markets), high nonseparability and high task programmability (case 7) precisely describes the conditions posited by Alchian & Demsetz (1972). Williamson (1975Williamson ( , 1985 argues that the "inside-contract" system is the real world governance structure that most resembles the Alchian & Demsetz (1972) (Williamson, 1985 (Ramanujam & Varadarajan, 1989 (Eisenhardt, 1989;Jensen & Meckling, 1976), the organizational economics literature (Barney & Ouchi, 1986), the property rights literature (Alchian, 1982;Jones, 1983;Grossman & Hart, 1986) and a dynamic resource-based theory of the firm (Mahoney & Pandian, 1990;Penrose, 1959;Wernerfelt, 1984) become available for enhancing our knowledge of vertical integration strategy and vertical governance structure.…”

Investigating the Integration of Acquired Firms in High-Technology Industries: Implications for Industrial Policy

“…This focus enabled us to isolate acquisitions of a specific type and to avoid studying a cross-section of merger and acquisition (M&A) activity that may introduce extraneous effects. Additionally, the time frame offered control over known impacts of the business cycle on acquisition activity (Ramanujam & Varadarajan, 1989) by ensuring all measurement was limited to a period of favorable economic conditions. A $10 million market capitalization restriction is consistent with the lower bound observed in previous acquisition research (e.g., Finkelstein, 1997;Ravenscraft & Scherer, 1987) and was intended to ensure target firms were large enough to impact acquiring firm performance.…”