The mode of corporate diversification: Internal ventures versus acquisitions

This study investigates empirically the underlying motives for selecting the mode of corporate diversification and attempts to match the form of capital investments with a corresponding theoretical rationale for diversification. The empirical results seem to support both the transaction‐costs rationale for diversification and the motive that arises from a firm's prior experience with each form of capital investment. However, the empirical findings are inconsistent with the explanation that is based on the owner‐manager conflict of interest.