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Research Article

A Critical Review of Diversification Research

Jung, Myeongil · Kim, Insu

Published: January 1997 · Vol. 26, No. 4 · pp. 915-939
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Abstract

Although many scholars have studied the expansion of resource capabilities through diversification, no literature could be found that systematically organized the connection between environmental changes occurring outside the firm and various problems internal to the firm. Therefore, we viewed corporate diversification as "a means of creating new capabilities through the shared utilization and transfer of resource capabilities" and proposed a framework for this purpose. Through this framework, we enabled the prediction of diversification strategy performance based on diversification motives, diversification methods, the degree of relatedness, and environmental changes. The main contents of this study are as follows. First, various perspectives on diversification strategy were compared. Next, how firms acquire resource capabilities through diversification strategies was identified. Finally, an integrative model was presented to demonstrate that "diversification aimed at acquiring new resource capabilities, rather than merely increasing the firm's external size, can be successful." In the conclusion, the limitations of this study and suggestions for future research were presented.