Session 79

Diversification Strategy and Firm Performance

Track F

Date: Monday, October 8, 2012

 

Time: 09:30 – 10:45

Paper

Room: Club B


Session Chair:

  • Heli Wang, Singapore Management University

Title: Diversification and Firm Performance: The Role of the Firm’s Dynamic Capabilities and Absorptive Capacity

Authors

  • Pavlos Symeou, Cyprus University of Technology
  • Tobias Kretschmer, LMU Munich

Abstract: Competing theories of the firm’s diversification behavior have been less than clear in projecting its effects on performance. We propose that diversification performance can be mediated by organizational mechanisms that can increase the efficiency of internal markets in allocating resources and maximize the uses of resource bundles. We argue that these mechanisms are embodied in the firm’s absorptive capacity and dynamic capabilities. The mediating impact of these mechanisms on the effects of related and unrelated diversifications on firm performance is examined based on a sample of 150 large ICT firms traded in the USA between 1975 – 2010. On average, the sample firms benefit from dynamic capabilities and absorptive capacity. Dynamic capabilities moderate the negative impact of unrelated diversification and absorptive capacity strengthens the positive impact of related diversification.

Title: Do Market and Techincal Assets Influence Entry into a Converging Industry? U.S. Banks\' Diversification into Investment Banking (1987-2010)

Authors

  • Ayesha Malhotra, University of Calgary

Abstract: Industry convergence is a type of industry transition in which the boundaries between two or more industries dissolve. The academic research on industry convergence is limited (Benner and Tripsas, 2012). In this paper, we look at resource determinants of a firm’s penetration into an adjacent, converging industry. By using a 24 year panel dataset on 95 U.S. commercial banks’ entry into the U.S. securities underwriting market, we make two unique contributions: (a) we examine simultaneous effects of market and technical resources on a bank’s securities activity; and (b) we allow for the possibility that these resources are endogenously determined. We find that market relationships with clients strongly predict the extent of a bank’s entry into investment banking but technical assets do not drive their entry.

Title: Understanding Intra-Industry-Diversification: Related Product Diversification in the German Automotive Industry

Authors

  • Christiane Zorn, University of Erlangen-Nuremberg
  • Stefan Weih, University of Erlangen-Nuremberg
  • Harald Hungenberg, University of Erlangen-Nuremberg

Abstract: The empirical study responds to the question of Stern & Henderson (2004): ‘How does diversifying within and across product lines affect business-level outcomes?’ The study focuses on the effect of related product diversification on market-based performance in the German automotive market analyzing 10-year sales data. Related product diversification is analyzed not only within one specific industry but also by differentiating two perspectives: a group perspective including all brands of one automotive group and a brand perspective analyzing only one specific brand. The latter is further separated into volume and premium brands to disclose differences between different types of brands. We find that related product diversification has a negative impact on performance from a brand perspective, but a positive impact in the group perspective.

Title: Within Industry Diversification and Performance – An S-shaped Hypothesis

Authors

  • Niron Hashai, Hebrew University of Jerusalem

Abstract: This study predicts an S-shaped relationship between within industry diversification and performance in single business firms. Initial increases in product scope impose complexities of shifting from a single product focus to simultaneously managing more than one product category, hence hampering performance. Once firms develop the capability to offset the costs of such complexities, synergies between related product categories lead to performance increase. Yet, extensive within industry diversification gives rise to coordination costs increase and reduces performance once again. Furthermore, greater pace of within industry diversification increases the costs and moderates the benefits of within industry diversification, while higher levels of intangible technological assets intensify both the costs and benefits of within industry diversification.

All Sessions in Track F...

Sun: 08:00 – 09:15
Session 123: Capabilities and Corporate Strategy
Sun: 09:30 – 10:45
Session 124: Corporate Strategy and the Role of the Manager
Sun: 11:15 – 12:30
Session 125: Publishing Strategic Management Research
Mon: 08:00 – 09:15
Session 256: Resource Sources and Corporate Strategy: Location, Funding and Advisors
Mon: 09:30 – 10:45
Session 79: Diversification Strategy and Firm Performance
Mon: 13:30 – 14:45
Session 88: Managing Firm Boundaries: Growth, Divestitures and Networks
Mon: 16:30 – 17:45
Session 77: Transformation, Renewal and Corporate Strategy
Tue: 08:00 – 09:15
Session 80: Acquisition Experience, Intensity and Performance
Tue: 11:00 – 12:15
Session 257: Acquisition Performance
Tue: 14:15 – 15:30
Session 86: Corporate Strategy: Expanding Understanding and Knowledge
Tue: 15:45 – 17:00
Session 253: New Insights into Relatedness and Performance


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