The Effect of Business Diversification on a Firm¡¯s Performance, Depending on Its Dynamic Capabilities and Market Dynamism

Young Sik Cho

Journal of Management and Strategy, 2013, vol. 4, issue 3, 1-8

Abstract: This study examines the relationships between a firm's business diversification, dynamic capabilities, and performance. In particular, using the lens of population ecological perspectives, the different effects of diversification on a firm's performance are investigated according to levels of market dynamism and the firm¡¯s dynamic capabilities. This study demonstrates that, in a rapidly changing market environment, the curvilinear relationship between diversification and firm performance can become weaker at higher levels of a firm's dynamic capabilities. In addition, this study argues that unrelated diversification can be a more ideal strategic choice in a dynamic market environment through a firm's optimized dynamic capabilities.

Keywords: business diversification; dynamic capabilities; market dynamism; a firm's structural inertia; population ecology (search for similar items in EconPapers)
Date: 2013
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