Antecedents and consequences of corporate diversification: A dynamic capabilities perspective

Abstract

Purpose

The main purpose of this paper is to introduce a comprehensive model explaining what affects the scope of the firm and also to find out its impact on firm performance.

Design/methodology/approach

This paper is based on an empirical analysis of a sample of 312 hardware manufacturing companies in Taiwan.

Findings

The research findings indicate that capability exploitation and upgrading will exert a positive influence on corporate diversification. In addition, corporate diversification will exhibit a curvilinear effect on firm performance.

Practical implications

Under the logic of capability‐based growth, managers should manage portfolios of capability upgrading and capability exploitation; and then, managers have to conduct econometric analyses to find out a firm's optimal level of corporate diversification for performance maximization.

Originality/value

This study attempts to propose a dynamic capabilities perspective, which suggests that the successful growth of a firm hinges on a strategic logic of capability‐based growth management containing both capability exploitation and capability upgrading, for exploring the antecedents and consequences of corporate diversification.

Citation

Liu, H. and Hsu, C. (2011), "Antecedents and consequences of corporate diversification: A dynamic capabilities perspective", Management Decision, Vol. 49 No. 9, pp. 1510-1534. https://doi.org/10.1108/00251741111173961