The link between resources and type of diversification: Theory and evidence
Article first published online: 8 NOV 2006
Copyright © 1991 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 12, Issue 1, pages 33–48, January 1991
How to Cite
Chatterjee, S. and Wernerfelt, B. (1991), The link between resources and type of diversification: Theory and evidence. Strat. Mgmt. J., 12: 33–48. doi: 10.1002/smj.4250120104
- Issue published online: 8 NOV 2006
- Article first published online: 8 NOV 2006
- Manuscript Revised: 20 APR 1990
- Manuscript Received: 9 OCT 1989
In this paper we theoretically and empirically investigate the idea that firms diversify in part to utilize productive resources which are surplus to current operations. Knowledge of these resources allows us to make predictions about the direction of a firm's expansion. In particular, we suggest that excess physical resources, most knowledge-based resources, and external financial resources are associated with more related diversification, while internal financial resources are associated with more unrelated diversification.