Business relatedness in international diversification: Achievements, gaps, and propositions
Abstract
Purpose
Business relatedness is important in international diversification because it enables a firm’s transfer of resources to business units operating in foreign markets. The purpose of this paper is to develop a conceptual model based on a review of the major contributions of studies regarding the relatedness of subsidiaries, joint ventures or any other foreign unit.
Design/methodology/approach
The paper examines theory bases, the relatedness construct, data issues and the key achievements of previous studies. Drawing on organizational learning, transaction costs economics and industrial organization, a conceptual model and propositions are developed that intend to close important research gaps.
Findings
The model includes competitive strategy as a mediator of the effects of relatedness on foreign unit performance, type of foreign unit – that is, a wholly owned unit or joint venture – as a moderator; and competition barriers as a moderator.
Research limitations/implications
In future research, the propositions need to be transformed into testable hypotheses. It is recommended to treat relatedness as a multidimensional concept.
Practical implications
A firm is primarily advised to evaluate how its relatedness with foreign units enables knowledge transfer. A foreign cost leadership strategy benefits from product relatedness, while a differentiation strategy calls for resource relatedness.
Originality/value
The proposed model is unique as it includes an actionable component that mediates the effects of relatedness on international performance, i.e. competitive strategy, and concerns both wholly owned foreign units and international joint ventures.
Keywords
Citation
Pehrsson, A. (2019), "Business relatedness in international diversification: Achievements, gaps, and propositions", European Business Review, Vol. 31 No. 2, pp. 197-217. https://doi.org/10.1108/EBR-03-2018-0069
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited