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Tekijä:Zhou, Y.M.
Otsikko:Synergy, coordination costs, and diversification choices
Lehti:Strategic Management Journal
2011 : JUN, VOL. 32:6, p. 624-639
Asiasana:USA
equipment
manufacturing industry
diversification
coordination
costs
complexity
integration
Vapaa asiasana:modularity
firm scope
Kieli:eng
Tiivistelmä:Following Penrose's insight, this paper argues that in order to realize the synergy, a firm needs to actively manage the interdependencies (hereafter as: intdpds.) btw. different business lines (herein as: bus-lns). In turn, this increases the coordination costs which may increase faster than synergy, setting a limit to related diversification (as: dvrsfn). This is especially salient when the firm's existing bus-lns. already have complex intdpds. among them. These arguments are tested using a dataset of U.S. equipment manufacturers from 1993 to 2003. The results show that a firm is more likely to diversify into a new business when its existing bus-lns. potentially can share more inputs with the new business. Yet, the firm is less likely to diversify into any new business when its existing bus-lns. are complex. Importantly, the firm's likelihood of diversifying into a new business decreases more with the complexity in the firm's existing bus-lns. if they share more inputs with the new business. These results suggest that increasing coordination costs counterbalance the potential synergistic benefits associated with related dvrsfn.
SCIMA tietueen numero: 274295
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