Existing Theory and Research

Abstract

Most large firms today are multibusiness firms (Bowman et al., 2001; Müller-Stewens & Brauer, 2007), which means that they are engaged in more than one business. Thus, a common characteristic of multibusiness firms (in the following, abbreviated with MBF) is that they are diversified, even though their degree of diversification might differ and vary over time (for an overview: Palich, Cardinal, & Miller, 2000; Ramanujam & Varadarajan, 1996). The primary entrepreneurial logic underlying the management of an MBF is identical to that of a single-business firm: to create added value (Goold et al., 1994). In contrast to single business firms, the management of an MBF assumes that it is able to create a higher added value as corporation, i.e., it is more than the sum of the value creation of its individual businesses. During the last several decades this phenomenon has been subject to extensive economic and management research efforts in order to understand whether, why and under which circumstances diversification of MBFs leads to corporate advantage, and consequently, how it can be managed.