Within‐business diversification in technology‐intensive industries

Ithai Stern and Andrew D. Henderson

Strategic Management Journal, 2004, vol. 25, issue 5, 487-505

Abstract: This study extends diversification research to a new level of analysis, examining how within‐business diversification, which occurs when firms extend existing product lines or expand into new ones, affects organizational survival. While prior research suggests that corporate‐level diversification accounts for relatively little variation in performance, within‐business diversification matters a great deal, by influencing which start‐ups survive and which firms better cope with rapid environmental change. Specifically, we find that the relationship between within‐business diversity and survival is contingent on the amount of environmental change wrought by a firm's competitors as they simultaneously diversify their own product portfolios and innovate technologically. Analysis of the population of U.S. personal computer manufacturers from the industry's founding in 1975 through 1994 supports our premise: Regardless of its effects across businesses, diversification matters a great deal within them. Copyright © 2004 John Wiley & Sons, Ltd.

Date: 2004
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