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The independent and joint effects of the skill and physical bases of relatedness in diversification
Author(s) -
Farjoun Moshe
Publication year - 1998
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/(sici)1097-0266(199807)19:7<611::aid-smj962>3.0.co;2-e
Subject(s) - diversification (marketing strategy) , complement (music) , sample (material) , econometrics , psychology , economics , marketing , business , biology , biochemistry , chemistry , chromatography , complementation , gene , phenotype
Abstract By examining the independent and joint effects of the skill and physical bases of relatedness, this study develops a multidimensional view of relatedness in diversification. The paper compares the ways the two bases identify relatedness, and examines empirically the relationship between relatedness and performance for a sample of 158 large diversified manufacturing firms. Each base of relatedness alone had no significant effect on financial performance. However, when the two approaches were combined, there was a strong positive effect on most indicators of performance. The findings demonstrate how different bases of relatedness complement and extend one another, and they clarify findings of previous studies that used a single base of relatedness. © 1998 John Wiley & Sons, Ltd.