Corporate Diversification And Organizational Structure: A Resource-Based View

We argue that related diversification enhances performance only when it allows a business to obtain preferential access to strategic assets—those that are valuable, rare, imperfectly tradable, and costly to imitate. As the advantage this access affords will decay as a result of asset erosion and imitation by single–business rivals, in the long run only competences that enable a firm to build new strategic assets more quickly and efficiently than competitors will allow it to sustain supernormal profits. Both short– and long–run advantages are conditional, however, on organizational structures that allow the firm's divisions to share existing strategic assets and to transfer the competence to build new ones efficiently.