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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.

This study investigates the extent to which structural equivalence between acquiring and target firms is associated with post-merger and acquisition (M&A) performance—a relationship that is proposed to be moderated by industry-level vertical relatedness between acquiring and target firms.

Applying social network analysis and regression, this study analyzes a buyer–supplier relationship network dataset of 279 M&A deals completed between 2010 and 2017 to test the hypotheses. Structural equivalence is measured as the proportion of common customers and suppliers between an acquiring firm and a target firm.

Supporting a view about the importance of supply chains in explaining M&As outcomes, the results suggest that the structural equivalence in the supplier network is positively associated with post-M&A firm performance. The results also show that the effect of the structural equivalence in the customer network is moderated by vertical relatedness between two merging firms (i.e. structural equivalence contributes to post-M&A performance when vertical industry relatedness is high).

This study contributes to the M&A and supply network literature by investigating the performance implications of structural equivalence in supplier and customer networks, demonstrating the importance of taking a supply chain view when explaining M&As outcomes. Specifically, the authors suggest considering structural equivalence as a new type of relatedness between merging firms (i.e. relatedness in network resources in explaining post-M&A performance). It also indicates how industry-level vertical resource relatedness, which is about relatedness in internal resources between the two firms, could interact with firm-level network resource relatedness, which is about relatedness in external supply chain resources between the two firms, in affecting post-M&A performance.

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.

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).

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.

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.

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.

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.

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.

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.

In future research, the propositions need to be transformed into testable hypotheses. It is recommended to treat relatedness as a multidimensional concept.

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.

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.

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

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.

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.

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.

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.

The purpose of this original research is to explore whether firms redeploy the resources that were withdrawn from existing businesses and use them to enter an emerging product market. We studied 244 firms that have exited from at least one business and analyzed whether the firms entered the emerging product market as a new business. The inducements of resource redeployment vary with information cues in media rhetoric about emerging and shifting threats of substitution between the firm’s existing businesses and the new one. Through our hazard rate analysis of entries of firms that exited existing businesses, we examined the hypotheses that resource redeployment through exit and entry may be driven by an interaction of the volume of substitution rhetoric with the resource commitments that the firm had made in the domain of the new business as well as the market relatedness between the firm’s existing businesses and the new one. Our study makes conceptual and methodological contributions to the research on inducements, by theorizing how performance advantages of new over existing businesses vary with product evolution and by characterizing emerging and shifting threats of substitution with content analysis of media rhetoric. Our study suggests that prior work investigating corporate diversification provides an incomplete picture of the contribution of resource relatedness to firm value and firm decision-making.

Drawing on conservation of resources (CoR) and speech act theories, the authors tested the relationship between managers’ motivating language (ML) and employee service quality and psychological relatedness and competence as mediating variables between their associations.

Using a convenient sampling technique, the authors collected 366 hotel employees’ opinions in Malaysia and analysed them in partial least squares-structural equation modelling.

Three forms of ML, psychological competence and relatedness correlate with employees’ service quality. Although direction-giving language is correlated with competence, empathetic and meaning-making language are not; thus, competence only mediates the relationship between direction-giving language and service quality. Three types (direction-giving, empathetic and meaning-making) of managers’ communication are correlated with relatedness; thus, relatedness mediates the association between the three types of language and service quality.

Hospitality managers are encouraged to enhance psychological relatedness and competence by practising an appropriate ML. Psychological relatedness and competence are significant mechanisms that enlighten the effects of supervisory communicant on service quality, indicating employees’ need satisfaction should be improved.

Our study contributes to speech act and CoR theories by explaining the relationship between ML, psychological relatedness, competence and service quality.

While the literature on corporate strategy has typically focused on examining diversification along the industry and geographical market dimensions, this study seeks to supplement previous research by introducing the concept of business model as a new way of thinking about diversification. Specifically, by integrating the literatures on business models, diversification, and acquisition strategy, we provide a conceptual analysis of how business model relatedness may influence performance implications of M&As. When business models among acquirers and targets are related, the sharing and transfer of superior resources may improve post-acquisition performance. In contrast, when business models among acquirers and targets are unrelated, internal and external identity conflicts may harm post-acquisition performance. Moreover, the conceptual framework developed in this study suggests that even if acquirers and targets are related in a product and geographical market sense, dissimilarities across business models may still harm post-acquisition performance. Overall, we suggest that using the recently emerged concept of business model may provide a new step in examining diversification decisions above and beyond the traditionally examined concepts of product and geographical markets, providing a more complete understanding of when and how multibusiness firms can create value.

This paper addresses resource redeployment in ecosystems. Prior research examines the value of resource redeployment across product markets in multi-business firms. In contrast, resource redeployment across ecosystems is an important corporate strategy employed by both single- and multi-business ecosystem firms that has received little attention. To address this gap, we present a case study of resource redeployment by an entrepreneurial firm in the US residential solar industry. We propose that the value creation mechanisms (i.e., improving capabilities, bottleneck relief) are fundamentally different when resources are redeployed in ecosystems. We identify “consumption-side” interdependence of components and “production-side” resource relatedness as playing critical roles in both types of value creation and propose conditions under which resource redeployment is most valuable. Overall, we contribute insights into the literatures on resource redeployment and strategy in business ecosystems.

Discusses how interrelationships can be developed for synergy. Also focuses on horizontal strategy as a way to achieve competitive advantage. Organizational context can determine a firm’s motivation and ability to develop interrelationships that result in overall competitive advantage. Corporate strategy must move beyond the idea that the primary way of creating synergy is the combination of related businesses (by buying and selling businesses). Corporate strategy must focus on creating value that is independent of business unit value. This means developing horizontal strategies that have the objective of coordinating activities and developing programs that encourage the sharing of resources and skills. An understanding of the horizontal organization helps to emphasize that organizational structure and processes are significant in developing interrelationships with the potential to reach the goals of synergy and competitive advantage.