An Expanded View of Multinational Corporation Diversification

Abstract

Business diversity¹ has been studied for many years because the logic that underpins the relatedness of a firm’s activities, and the extent to which these activities are connected, have important practical implications (Rumelt, 1974; Wrigley, 1970). Given the accelerating trend towards economic globalization, a process that is being driven forward by multinational corporations, the impact of diversification of these firms’ activities is increasingly important to managers who are responsible for their organization’s strategic direction, to strategy scholars who are focused on the behaviour and performance of firms in the international marketplace, and to policy-makers who must understand the nature of the organizations that populate the economy. Yet, prior research has not achieved a consensus on the relationship between diversity and economic performance for reasons that relate, in part, to inadequate or incomplete theory (Dess, Gupta, Hennart, & Hill, 1995; Hoskisson & Hitt, 1990). This book, therefore, examines the traditional theoretical views on the relationship between business diversity and performance and also introduces several new concepts that have become increasingly relevant.