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Revamping research on unrelated diversification strategy: perspectives, opportunities and challenges for future inquiry

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Abstract

With the aim of achieving an advanced understanding of current research on unrelated diversification and providing fruitful groundwork to foster active interchange between disciplinary traditions, this paper detects articles from two relevant research streams; i.e., strategic management and financial economics. We first provide a brief overview of management thinking on unrelated diversification strategy. Then, we present a conceptual map that offers a comprehensive appreciation of unrelated diversification strategy antecedents (i.e., environmental and institutional, organizational value-enhancing, and managerial drivers), implementation process (i.e., managerial complexity, misallocation of resources, and structural inertia), and consequences (i.e., diversification premiums and discounts). Finally, we unpack the major gaps in our current knowledge that may help refocus the research agenda on unrelated diversification strategy and revamp the apparent waning proclivity of this issue.

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Notes

  1. We observe that financial economics and strategic management have dissimilar preferences in using terminology. In strategic management, the expression “conglomerate diversification” came into disrepute in the 1990s, since when strategy researchers prefer to talk of “unrelated diversification.” Conversely, finance researchers are more comfortable with “conglomerate diversification” and frequently use the term synonymously with “unrelated diversification.” In fact, the management literature generally assumes that single-business, related, and unrelated diversification are equivalent to low, moderate, and high diversification, respectively. In this vein, Palich et al. (2000) observe that “it is very common for researchers to convert measures of type of diversification into continuous data representing levels of diversification” (p. 158).

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Acknowledgments

We are grateful to JMG Editor Roberto Di Pietra and three anonymous reviewers for their constructive comments on early versions of this paper.

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  1. Department of Economics and Business, University of Catania, Corso Italia, 55, 95129, Catania, Italy

    Pasquale Massimo Picone & Giovanni Battista Dagnino

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Correspondence to Giovanni Battista Dagnino.

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This article is one of the outcomes of a multi-annual research project that we are conducting on unrelated diversification and performance.

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Picone, P.M., Dagnino, G.B. Revamping research on unrelated diversification strategy: perspectives, opportunities and challenges for future inquiry. J Manag Gov 20, 413–445 (2016). https://doi.org/10.1007/s10997-014-9305-x

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