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Book part
Publication date: 5 July 2016

Martin Weiss

The linkage between diversification and performance has puzzled scholars for decades. A vast amount of empirical studies, together with the help of meta-analyses…

Abstract

The linkage between diversification and performance has puzzled scholars for decades. A vast amount of empirical studies, together with the help of meta-analyses condensing diverse results, established a widely shared understanding that related diversification leads to superior firm performance. The main rationale for this finding is that relatedness within a company’s portfolio of businesses allows the company to achieve synergies by sharing or transferring resources. Although the predominant importance of related diversification seems generally accepted, scholars raise severe concerns about our ability to precisely define and measure relatedness. In most studies, traditional measures of diversification such as the Berry index are used, which assess relatedness from a product/market perspective. However, these measures face strong criticisms for their low degree of content validity. So if we doubt our understanding of relatedness, how can we agree on the performance effect of related diversification? To reassure our understanding of the diversification-performance linkage, this study critically reflects upon the underlying phenomenon of relatedness. By compiling and evaluating the different perspectives of relatedness with their heterogeneous conceptualizations and measures, this study supports the view that the multi-facetted nature of relatedness can only be captured inadequately so far. Moreover, most prior work mainly focuses on synergy potential rather than on the realization of synergies, thereby neglecting a mechanism that may have an important bearing on the performance effects of diversification.

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Book part
Publication date: 18 August 2006

Lasse B. Lien and Peter G. Klein

While the strategic management literature suggests that related diversification is superior to unrelated diversification, there is little evidence that acquirers benefit…

Abstract

While the strategic management literature suggests that related diversification is superior to unrelated diversification, there is little evidence that acquirers benefit from pursuing related targets. We argue that the empirical literature is plagued by poor measures of relatedness. Moreover, many empirical studies do not control adequately for the characteristics of the market for corporate control. We argue that not only value creation, but also value appropriation, depend on the relatedness of acquirer and target. Using an improved measure of relatedness, we provide empirical evidence that acquirer returns are positively and significantly correlated with relatedness.

Details

Advances in Mergers and Acquisitions
Type: Book
ISBN: 978-0-76231-337-2

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Article
Publication date: 10 November 2020

Haifeng Yan, Qihu Wang, Yi Ke and Juan Wang

It is widely accepted that business excellence comes from firm-specific factors. However, it is still unclear how institutional relatedness – the degree of embeddedness…

Abstract

Purpose

It is widely accepted that business excellence comes from firm-specific factors. However, it is still unclear how institutional relatedness – the degree of embeddedness with the dominant institutions that confer resources and legitimacy, influences the business excellence of the firm. The purpose of this study is to explore the influence of three kinds of institutional relatedness, i.e. home government ties, initial public offerings (IPOs) and alliances with foreign firms, on the business excellence of Chinese firms.

Design/methodology/approach

This study uses a sample of firms enlisted on the “Most Respected Companies” rank in China during the period 2002–2015 and their paired firms who are absent from the list, by means of ordinary least square regression estimator, to explore the relationship between institutional relatedness and business excellence.

Findings

The empirical results suggest that IPOs and alliances with foreign firms significantly strengthen firms’ business excellence. Furthermore, home government ties have positive effects on outbound IPOs and alliances with foreign firms but hinder business excellence.

Originality/value

This study extends the business excellence literature by characterizing institutional rather than firm-specific factors from an institution-based view. It also enriches research on outcomes of institutional relatedness through investigating empirically its impact on business excellence. The findings provide new insights into the dual role of home government ties in achieving business excellence.

Details

Chinese Management Studies, vol. 15 no. 2
Type: Research Article
ISSN: 1750-614X

Keywords

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Article
Publication date: 8 June 2020

Robert Garrett, Shaunn Mattingly, Jeff Hornsby and Alireza Aghaey

The purpose of this study is to evaluate the effect of opportunity relatedness and uncertainty on the decision of a corporate entrepreneur to pursue a venturing opportunity.

Abstract

Purpose

The purpose of this study is to evaluate the effect of opportunity relatedness and uncertainty on the decision of a corporate entrepreneur to pursue a venturing opportunity.

Design/methodology/approach

The study uses a conjoint experimental design to reveal the structure of respondents' decision policies. Data were gathered from 47 useable replies from corporate entrepreneurs and were analyzed with hierarchical linear modeling (HLM).

Findings

Results show that product relatedness, market relatedness, perceived certainty about expected outcomes and slack resources all have a positive effect on the willingness of a corporate entrepreneur to pursue a new venture idea. Moreover, slack was found to diminish the positive effect of product relatedness on the likelihood to pursue a venturing opportunity.

Practical implications

By providing a better understanding of decision-making schemas of corporate entrepreneurs, the findings of this study help improve the practice of entrepreneurship at the organizational level. In order to make more accurate opportunity assessments, corporate entrepreneurs need to be aware of their cognitive strategies and need to factor in the salient criteria affecting such assessments.

Originality/value

This paper adds to the limited understanding of corporate-level decision-making with regard to pursuing venturing opportunities. More specifically, the paper adds new insights regarding how relatedness and uncertainty affect new venture opportunity assessments in the presence (or lack thereof) of slack resources.

Details

Management Decision, vol. 59 no. 5
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 1 September 2006

Anders Pehrsson

The purpose of this paper is to extend understanding of business relatedness, a concept that is central to diversification issues. These questions are put forward: What…

Abstract

Purpose

The purpose of this paper is to extend understanding of business relatedness, a concept that is central to diversification issues. These questions are put forward: What characterizes existing types of measurements of business relatedness? What are the weaknesses of these types? What would be the features of a model for measurement of business relatedness?

Design/methodology/approach

As relatedness concerns specific business attributes, common attributes used in measurements are presented. A review of previous studies on types of measurements of business relatedness (codes or indices, researcher assessments and managerial perceptions) is followed by a discussion on correlations between perceptual and objective measurements.

Findings

The review shows that application of standard industrial classification codes/indices and researcher assessments suffer from weak content validity of the measurements, and underestimation of the multidimensionality of the construct. Use of managerial perceptions needs to address the uncertainty inherent in managerial self‐assessments; previous research has found a major divergence between perceptual and objective measurements.

Practical implications

A model is proposed for the measurement of business relatedness using perceptual data. It is stressed that the context of the comparisons (i.e. reason for comparison and units to be compared) has a major influence on the outcomes. Business attributes to be subjectively compared by managers are those that have been singled out as important for financial performance.

Originality/value

The paper is unique as it represents a continuation of the most recent research on measurement of business relatedness, i.e. those measurements that are based on managerial perceptions. Another key value is that the review of research leads to a measurement model.

Details

European Business Review, vol. 18 no. 5
Type: Research Article
ISSN: 0955-534X

Keywords

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Article
Publication date: 11 March 2019

Anders Pehrsson

Business relatedness is important in international diversification because it enables a firm’s transfer of resources to business units operating in foreign markets. The…

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.

Details

European Business Review, vol. 31 no. 2
Type: Research Article
ISSN: 0955-534X

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Article
Publication date: 9 October 2017

Anders Pehrsson

The study draws on the resource-based view and the contingency view of strategy. The purpose of this paper is to contribute to international strategy literature by…

Abstract

Purpose

The study draws on the resource-based view and the contingency view of strategy. The purpose of this paper is to contribute to international strategy literature by extending the current understanding of foreign subsidiary’s competitive strategy in terms of cost leadership and product differentiation.

Design/methodology/approach

Hypotheses concern associations between corporate support building on product and skills relatedness and subsidiary strategies. Also, it is hypothesized that strategies are due to the type of local competitive intensity. The hypotheses were tested on wholly owned subsidiaries of Swedish industrial firms in Germany, the UK and the USA.

Findings

Product and skills relatedness between the subsidiary and the corporate core unit are positively associated with the subsidiary’s emphasis on cost leadership. Also, a positive association was found between skills relatedness and product differentiation, and extensive competitive intensity strengthens the relationship.

Research limitations/implications

The study specifies what business relatedness is needed for a subsidiary’s competitive strategy; skills relatedness is more important than product relatedness; the type of local competitive intensity is important; corporate support and local strategy operate simultaneously.

Practical implications

Management is advised to implement a foreign subsidiary’s competitive strategy by recognizing the mechanisms identified in this study.

Originality/value

In a unique way, the study captures the role of corporate support of a foreign subsidiary’s competitive strategy relying on business relatedness and the importance of aligning the strategy with competitive intensity.

Details

European Business Review, vol. 29 no. 6
Type: Research Article
ISSN: 0955-534X

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Article
Publication date: 18 May 2010

Anders Pehrsson

The purpose of this paper is to improve the existing knowledge of international strategy antecedents of foreign subsidiary performance.

Abstract

Purpose

The purpose of this paper is to improve the existing knowledge of international strategy antecedents of foreign subsidiary performance.

Design/methodology/approach

Hypotheses are developed regarding the impact of perceived relatedness between the foreign subsidiary and the parent firm's core business unit, and the moderating effect of the subsidiary's business strategy. In order to test the hypotheses, the study uses survey data from Europe (Germany and the UK), and the USA, and the subsidiaries belong to Swedish manufacturing firms.

Findings

Perceived relatedness regarding intangible resources affects foreign subsidiary performance positively. Competitive differentiation and market knowledge of a foreign subsidiary reinforce the performance impact of the perceived relatedness.

Research limitations/implications

A foreign subsidiary's relatedness to the core business unit of its parent firm determines the subsidiary's ability to assimilate the parent firm's core competencies. The relatedness represents a synergy potential that is realized by the subsidiary's core competence exploitation and economies of learning.

Originality/value

The paper extends current knowledge of international strategy antecedents of foreign subsidiary performance as it applies the perceptual approach to relatedness and acknowledges the impact of foreign subsidiary strategy.

Details

Journal of Strategy and Management, vol. 3 no. 2
Type: Research Article
ISSN: 1755-425X

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Article
Publication date: 14 May 2018

Sulah Cho

The purpose of this paper is to utilize co-query volumes of brands as relatedness measurement to understand the market structure and demonstrate the usefulness of brand…

Abstract

Purpose

The purpose of this paper is to utilize co-query volumes of brands as relatedness measurement to understand the market structure and demonstrate the usefulness of brand relatedness via a real-world case.

Design/methodology/approach

Using brand relatedness measurement obtained using data from Google Trends as data inputs into a multidimensional scaling method, the market structure of the automobile industry is presented to reveal its competitive landscape. The relatedness with brands involved in product-harm crisis is further incorporated in empirical models to estimate the influence of crisis on future sales performance of each brand. A representative incident of a product-harm crisis in the automobile industry, which is the 2009 Toyota recall, is investigated. A panel regression analysis is conducted using US and world sales data.

Findings

The use of co-query as brand relatedness measurement is validated. Results indicate that brand relatedness with a brand under crisis is positively associated with future sales for both US and global market. Potential presence of negative spillovers from an affected brand to innocent brands sharing common traits such as same country of origin is shown.

Originality/value

The brand relatedness measured from co-query volumes is considered as a broad concept, which encompasses all associative relationships between two brands perceived by the consumers. This study contributes to the literature by clarifying the concept of brand relatedness and proposing a measure with readily accessible data. Compared to previous studies relying on a vast amount of online data, the proposed measure is proven to be efficient and enhance predictions about the future performance of brands in a turbulent market.

Details

Industrial Management & Data Systems, vol. 118 no. 4
Type: Research Article
ISSN: 0263-5577

Keywords

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Article
Publication date: 5 April 2011

Masahiro Ito, Kotaro Nakayama, Takahiro Hara and Shojiro Nishio

Recently, the importance and effectiveness of Wikipedia Mining has been shown in several researches. One popular research area on Wikipedia Mining focuses on semantic…

Abstract

Purpose

Recently, the importance and effectiveness of Wikipedia Mining has been shown in several researches. One popular research area on Wikipedia Mining focuses on semantic relatedness measurement, and research in this area has shown that Wikipedia can be used for semantic relatedness measurement. However, previous methods are facing two problems; accuracy and scalability. To solve these problems, the purpose of this paper is to propose an efficient semantic relatedness measurement method that leverages global statistical information of Wikipedia. Furthermore, a new test collection is constructed based on Wikipedia concepts for evaluating semantic relatedness measurement methods.

Design/methodology/approach

The authors' approach leverages global statistical information of the whole Wikipedia to compute semantic relatedness among concepts (disambiguated terms) by analyzing co‐occurrences of link pairs in all Wikipedia articles. In Wikipedia, an article represents a concept and a link to another article represents a semantic relation between these two concepts. Thus, the co‐occurrence of a link pair indicates the relatedness of a concept pair. Furthermore, the authors propose an integration method with tfidf as an improved method to additionally leverage local information in an article. Besides, for constructing a new test collection, the authors select a large number of concepts from Wikipedia. The relatedness of these concepts is judged by human test subjects.

Findings

An experiment was conducted for evaluating calculation cost and accuracy of each method. The experimental results show that the calculation cost of this approach is very low compared to one of the previous methods and more accurate than all previous methods for computing semantic relatedness.

Originality/value

This is the first proposal of co‐occurrence analysis of Wikipedia links for semantic relatedness measurement. The authors show that this approach is effective to measure semantic relatedness among concepts regarding calculation cost and accuracy. The findings may be useful to researchers who are interested in knowledge extraction, as well as ontology researches.

Details

International Journal of Web Information Systems, vol. 7 no. 1
Type: Research Article
ISSN: 1744-0084

Keywords

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