Diversification to Achieve Scale and Scope: The Strategic Implications of Resource Management for Value Creation

Abstract

Research on diversification has produced insights into possible linkages between organizational scale and scope and firm performance. However, the paucity of research on its implementation has hindered our understanding of the broader performance implications of these strategies. We extend the resource-based view and diversification research by examining how firms can exploit diversifying investments designed to achieve scale and scope economies. Successful firms more effectively structure their resource portfolio, bundle resources into capabilities, and leverage these capabilities when implementing diversification strategy. We develop a model linking strategies by which firms expand product and geographic market scope to the actions they take to manage resources. We examine three actions-internal development, acquisitions, and strategic alliances-and discuss the implications of these actions using the resource management framework.

Keywords: Diversification, resource-based view, resource management, resource-based view