Matthias Knecht
Diversification, Industry
Dynamism, and
Economic Performance
The Impact of
Dynamic-related Diversification
on the Multi-business Firm
fyj Springer G a bier
CONTENTS
FOREWORD
VII
ACKNOWLEDGMENTS
IX
CONTENTS
XI
LIST OF FIGURES
XVII
LIST OF TABLES
XIX
LIST OF ABBREVIATIONS
XXI
1
INTRODUCTION
1.1
Problem Definition
1.2
Research Gap and Motivation
1.2.1
Diversification, Relatedness, and Performance
1.2.2
The Dynamism of Industries
2
1
1
3
3
5
1.3
Research Question
1.3.1
Industry Dynamism
1.3.2
Corporate Diversification
1.3.3
Method of Reasoning
6
7
8
10
1.4
11
Dissertation Outline
THEORETICAL BACKGROUND
14
2.1
Guiding Theories in Strategic Management
2.1.1
Market-based View
2.1.2
Resource-based View
2.1.3
Dynamic Capabilities View
14
15
19
24
2.2
Terminology
!
2.2.1
Resources
2.2.2
Capabilities and Competencies
2.2.3
Dynamic Capabilities
2.2.4
Rents
28
29
30
32
35
2.3
The Environment of the Firm
2.3.1
Definition of the Macro Environment
37
38
XI
3
2.3.2
Definition of the Task Environment
2.3.3
Dimensions of the Environment
2.3.3.1 Munificence
2.3.3.2 Complexity
,
2.3.3.3 Dynamism
39
40
41
42
44
CORPORATE DIVERSIFICATION
47
3.1
Corporate Diversification: An Introduction
3.1.1
Definition of Diversification
3.1.1.1 Related and Unrelated Diversification
3.1.1.2 Horizontal, vertical, and conglomerate diversification
3.1.1.3 Domestic and international diversification
3.1.2
A Process Perspective on Diversification
3.1.3
A Status Perspective on Diversification
3.1.4
Perspective on Corporate Diversification in this Research
47
47
49
50
51
52
53
54
3.2
Motives for Diversification
3.2.1 s Synergies
3.2.2
Agency Theory
3.2.3
Market Power
3.2.4
Risk Reduction
3.2.5
Transaction Costs
55
56
59
60
62
64
3.3
Limits and Costs of Diversification
3.3.1
Implementation Costs
3.3.2
Complexity and Coordination Costs
3.3.3
Limited Cognitive Capacity
66
66
67
68
3.4
Diversification and Economic Performance
3.4.1
Substitutability vs. Complementarity
3.4.2
Relatedness and the Realization of Synergies
3.4.3
Operational Relatedness
3.4.4
Strategic Relatedness
3.4.5
Relatedness as a Multidimensional Construct
:
70
71
73
74
75
77
3.5
The Diversification-Performance Puzzle
:
3.5.1
State of Research on the Diversification-Performance Linkage
3.5.2
Methodological Considerations
78
78
85
3.6
88
4
Interim Conclusion
,
INDUSTRY DYNAMISM
4.1
Industry Dynamism: An Introduction
4.1.1
The Concept of Dynamism
4.1.2
Understanding Dynamism: A Growing Confusion
XII
90
90
90
92
4.1.3
5
Academic Contributions on Dynamism
93
4.2
Definition of Dynamism in the Context of this Research
4.2.1
Dynamism as a Multidimensional Construct
4.2.2
The Three Dimensions of Dynamism
4.2.2.1 Frequency
4.2.2.2 Intensity
4.2.2.3 Uncertainty
99
99
100
102
103
105
4.3
Impact of Dynamism on the Multi-business Firm
4.3.1
Dynamic Capabilities
4.3.1.1 Capabilities in Dynamic and Undynamic Environments
4.3.1.2 Performance Effect of Dynamic Capabilities
4.3.1.3 Synergies Through the Transfer of Dynamic Capabilities
4.3.2
Dominant Logic
4.3.2.1 Concept of the Dominant Logic
4.3.2.2 Impact of Dynamism on the Dominant Logic
4.3.2.3 Managerial Synergies through Dynamic-relatedness
4.3.3
Synthesis: Dynamism as aNew Dimension of Strategic Relatedness
108
110
110
Ill
113
115
116
117
118
119
4.4
Hypotheses and Research Model
4.4.1
Standards for Hypothesis Development
4.4.2
Performance Effect of Dynamic-related Diversification
4.4.3
Performance Effect of Relatedness on the Dimensions of Dynamism
4.4.4
Effect of Product/Market-based Relatedness
4.4.5
Overview Research Model
121
121
122
123
125
127
EMPIRICAL ANALYSIS I: INDUSTRY DYNAMISM
129
5.1
Measurement of Industry Dynamism
5.1.1
Literature Review on the Measurement of Dynamism
5.1.1.1 Methodology
5.1.1.2 Results
5.1.2
Development of Measures for the Dimensions of Dynamism
5.1.2.1 Requirements for the Measurement Approach
5.1.2.2 Measuring Frequency
'
5.1.2.3 Measuring Intensity
5.1.2.4 Measuring Uncertainty
5.1.3
Interim Conclusion
129
130
130
135
137
137
140
144
149
154
5.2
Methodological Considerations
5.2.1
Dataset
5.2.2
Measurement Specification
5.2.3
Combining the Dimensions of Dynamism ...•.
155
155
159
161
5.3
Empirical Analysis and Discussion of Results
5.3.1
Descriptive Results
166
166
XIII
5.3.2
5.3.3
5.3.4
5.3.5
5.3.6
5.3.7
6
The Dynamism of Industries: A Status-based Perspective
Changes in Dynamism Over Time: A Temporal Perspective
Regional Differences in Dynamism: A Geographical Analysis
Dynamism Clusters and Relatedness: Similarities Across Industries
Limitations
Interim Conclusion
EMPIRICAL ANALYSIS n : DYNAMIC-RELATED DIVERSIFICATION
169
173
180
183
185
186
188
6.1
Measurement of Dynamic-relatedness
6.1.1
Approaches to the Measurement of Diversification and Relatedness
6.1.1.1 Continuous Measures
•. ...^
6.1.1.2 Categorical Measures
6.1.1.3 Alternative Measures
6.1.2
Development of the Dynamic-relatedness Measures
6.1.2.1 Distance-based Measure
6.1.2.2 Cluster-based Measure
188
189
190
198
205
209
210
215
6.2
Research Model
6.2.1
Research Design and Process
6.2.2
Operationalization of Variables
6.2.2.1 Independent Variables
6.2.2.2 Dependent Variables
6.2.2.3 Control Variables
6.2.2.4 Moderator Variables
6.2.3
Datasetand Sample Selection
218
218
220
220
222
225
230
231
6.3
Empirical Analysis
6.3.1
Descriptive Analysis
6.3.1.1 Methodological Remarks
6.3.1.2 Results of the Descriptive Analysis
6.3.2
Panel Analysis
6.3.2.1 Estimator Selection and Model Definition
6.3.2.2 Performance Effect of Dynamic-related Diversification
6.3.2.3 Performance Effect of Relatedness on the Dimensions of Dynamism
6.3.2.4 Moderating Effect of Product/Market-based Relatedness
6.3.2.5 Robustness of Results
6.3.2.6 Summary of Results
6.3.3
Interpretation of Results
'.
6.3.3.1 Dynamic-relatedness and Performance
6.3.3.2 Relatedness on the Dimensions of Dynamism and Performance
6.3.3.3 Moderating Effects
235
235
235
236
241
243
250
255
260
264
267
268
269
273
275
xrv
7
CONCLUSION AND OUTLOOK
277
7.1
Conclusion
7.1.1
The Dynamism of Industries
7.1.2
Corporate Diversification and Dynamic-relatedness
277
277
278
7.2
Implications for Academics and Practitioners
7.2.1
Implications for Academic Research
7.2.2
Implications for Corporate Management
280
280
282
7.3
Limitations
283
7.4
Outlook and Agenda for Future Research
284
APPENDIX
BIBLIOGRAPHY
'.
...r....
287
305
XV