To read this content please select one of the options below:

Firm capabilities and diversification: how mission matters

Mohammad Pakneiat (Senior Advisor at SamaSamaneh Advisory Company, Tehran, Iran)
Monireh Panahi (PhD candidate at Shahid Beheshti University, Tehran, Iran)
Javad Noori (Director of the Technology Management Department at Iran Khodro, Tehran, Iran)

Business Strategy Series

ISSN: 1751-5637

Article publication date: 6 July 2010

8224

Abstract

Purpose

The literature on large firms in developing countries proposes a link between types of capabilities and diversification pattern. It is argued that technological/organizational capabilities lead to related diversification, and by using contact/general capabilities firms (mostly in developing countries) are able to diversify into unrelated fields. However, in our case, despite the presence of contact/general capabilities, only related diversification is observed. Limitation of the scope of diversification does not allow them to invest in different lucrative businesses. Most successful firms in developing countries have diversified vastly.

Design/methodology/approach

To determine out the reason for this behavior in this case, in‐depth interviews based on open‐ended semi‐structured questionnaire with key 12 decision‐makers were carried out. Each interview took about 90 minutes.

Findings

The case study showed that firms' approach to mission development is connected to firm diversification and capabilities. A mission developed based on a strategic approach leads to the development of technological/organizational capabilities, which make related diversification more likely. However, a mission developed based on a philosophical approach when added to firm contact/general capabilities encourages unrelated diversification.

Research limitations/implications

The research takes for granted the role of national conditions (e.g. macroeconomic indexes) when it is argueed that the behavior of Khodro is expected to be similar to firms in other developing countries (or formerly developing countries, e.g. South Korea). The work presented here could be tested again in two or more firms in a similar environment.

Practical implications

The paper's findings should help firms in developing countries to develop their mission statement in a way that allows them to grow faster via unrelated diversification. It also informs them about the limitations of a strategic approach to their mission that hinders them from leveraging their contact and general capabilities.

Originality/value

Previous research has not paid enough attention to managerial issues in firms in developing countries. Firms in developing countries need more context‐specific instructions to succeed.

Keywords

Citation

Pakneiat, M., Panahi, M. and Noori, J. (2010), "Firm capabilities and diversification: how mission matters", Business Strategy Series, Vol. 11 No. 4, pp. 248-260. https://doi.org/10.1108/17515631011063785

Publisher

:

Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

Related articles