Despite the recognition that many firms operate multiple business models at the same time, little is known about when and how business model diversification may create value. In this study, we develop the construct of business model relatedness and examine its relationship with firm performance. Using a unique panel dataset of multibusiness firms in the retail- and wholesale-trade sectors (1997-2010), we find that the extent to which business model diversification is related increases firm performance. Interestingly, results also show that business model relatedness is more influential in determining firm performance than industry relatedness. This finding suggests that the concept of business model relatedness may be better able to capture the underlying resource relatedness among lines of business than the traditionally used concept of industry relatedness.
Different from previous literature on cross-industry diversification, this study investigates the performance implications of multiunit firms’ related and unrelated diversification behavior within a single industry. In addition, the study contributes to the literature by examining performance implications of firms’ dynamic development of capabilities based on their accumulated diversification experience. Drawing from the resource-based view of diversification, I conceptualize related within-industry diversification based on the resource overlap of operating units and test performance outcomes using a unique dataset of the world’s leading retail firms’ unit (i.e., retail format) diversification behavior over thirteen years (from 1997 to 2009). Results show that profits first decrease at low levels of relatedness and then increase at an increasingly higher level as corporate parents focus stronger on related within-industry diversification. Moreover, I find suggestive evidence that unrelated within-industry diversification has a negative effect on profits. In contrast to profits, both related and unrelated within-industry diversification increase a parent firm’s sales-based market share in the following year. Finally, the study indicates that especially related diversifiers who exceed a distinct (minimum) level of related within-industry diversification are able to develop capabilities over time that lead to superior firm performance. Specifically, the complementary effects of high degrees of related within-industry diversification in combination with longer experience with related diversification enable corporate parents to outperform competition.
Previous research found mixed empirical results of the international diversification-performance relationship (i.e., S-shaped and inverted U-shaped). Our study develops a theoretical framework to address this inconsistency in the literature. Specifically, we propose that multinational enterprises' (MNEs) ownership structure (i.e., public vs. private) moderates the effect of international diversification on firm performance. Since previous research found that the possession of certain assets, such as financial and human capital, might be driving superior international performance, we propose that public MNEs may be able to outperform private MNEs, especially at higher levels of international diversification, because of their superior access to financial capital markets and experienced top managers.
This study develops a conceptual framework that captures key dimensions of product-market relatedness (i.e., product and customer relatedness) and business-model relatedness (i.e., value-proposition and distribution-channel relatedness). While previous research has typically investigated how related diversification along the product dimension affects performance, this study argues that superior performance may be driven by heretofore widely neglected intangible dimensions of relatedness beyond the product dimension. We test this argument using a unique dataset of 170 multiunit chain organizations for the period from 1999 to 2010. We first verify prior empirical findings by showing that related product diversification alone appears to be positively related to performance. Moreover, beyond previous findings, results show that related diversification along the customer and value-proposition dimensions also increases performance. Interestingly, the tangible product dimension of relatedness becomes insignificant in combination with intangible relatedness dimensions, providing support for our argument that superior performance is mainly driven by resource flows along intangible dimensions of relatedness.
This study examines the relative importance of three relatedness dimensions - product, customer, and business-model relatedness - to explain corporate performance. Using a unique dataset of 170 multiunit chain organizations from 1999 to 2010, we first verify prior empirical findings by showing that related product diversification is positively associated with performance. Beyond previous findings, results Show that related customer and business-model diversification is also positively associated with performance. Interestingly, when simultaneously examined, related product diversification becomes insignificant, while related customer and business-model diversification remain significantly positively associated with performance. This finding suggests that the concepts of customer and business-model relatedness may be better able to capture resource relatedness among lines of business than the predominantly used concept of product relatedness.
