Opportunity costs, industry dynamics, and corporate diversification

• Autores: Brian Wu
• Localización: Strategic management journal, ISSN 0143-2095, Vol. 34, Nº 11, 2013, págs. 1265-1287
• Idioma: inglés
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• Resumen

  • This paper examines how demand conditions across alternative markets impact diversification decisions and firm performance by influencing the opportunity costs of deploying non-scale free capabilities. Using data within the cardiovascular medical device industry, this study shows that: (1) firms with a larger stock of pre-entry innovation experience are more likely to diversify; (2) firms in a current market with greater relative demand maturity are more likely to diversify; (3) diversification is associated with a performance decrease in the current market; and (4) diversification is associated with a performance increase at the corporate level. These findings shed new light on the self-selection process of corporate scope, the conceptualization of firm capabilities, and the connection between industry dynamics and resource deployment.