Agency and Institutions: National Divergences in Diversification Behavior

Bruce Kogut (), Gordon Walker () and Jaideep Anand ()
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Bruce Kogut: The Wharton School, University of Pennsylvania, 2041 Steinberg Hall-Dietrich Hall, Philadelphia, Pennsylvania 19104-6370
Gordon Walker: Cox School of Business, Southern Methodist University, P.O. Box 750333, Dallas, Texas 75275
Jaideep Anand: University of Michigan Business School, 701 Tappan Street, Ann Arbor, Michigan 48109

Organization Science, 2002, vol. 13, issue 2, 162-178

Abstract: A fundamental theme in comparative crosscountry research is the convergence of organizational forms in diverse national settings. In this paper we examine a special instance of this theme: the pattern of diversification across industries. A common argument is that technical and market forces compel firms to adopt “coherent” strategies of diversification. This thesis implies that there should be a convergence in the patterns of interindustry diversification in all market-based economies. An institutional approach offers an alternative view. From this perspective, when diversification across industries is seen as subject to nation-specific governance and resource constraints, countries should vary widely in their interindustry diversification patterns.To test these alternative views, we analyze the diversification patterns of large corporations from five countries: France, Germany, Japan, the United Kingdom, and the United States. Our results do not support the hypothesis of a common pattern of diversification across countries, and thus reject the technological thesis. By comparing two case studies in which entrepreneurs attempted to diversify by acquisition in France and the United States, we examine how institutions and agents interact to permit different diversification patterns to arise in diverse national environments.The statistical results and case studies imply that, given the fixity of certain institutions, even if countries are subject to globalization, convergence in diversification patterns is not necessary. The results cast doubt upon the merits of stylizing the debate as a choice between technical and institutional theories of organizational choice. Rather, the study points to the importance of two theoretical statements. The first is to inquire under what conditions there is likely to be consensus on a given “means-end” rationality for a specific managerial decision (e.g., diversification). The second is to understand the structural opportunities available to entrepreneurs for diversifying through acquisitions. Iterating between these cognitive and structural considerations shifts the focus from the false debate between technological and institutional arguments to the study of entrepreneurship situated in historically given national environments.

Keywords: Institutions; Diversification; National Convergence (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (24)

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