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Keywords:

  • corporate diversification strategy;
  • knowledge synergy;
  • relatedness;
  • complementarity;
  • survey methodology;
  • structural equation modeling;
  • second-order construct

Abstract

This study examines corporate performance effects of cross-business knowledge synergies in multibusiness firms. It synthesizes the resource-based view of diversification and the economic theory of complementarities to conceptualize cross-business knowledge synergies in terms of the relatedness and the complementarity of knowledge resources across business units of the multibusiness firm. The study hypothesizes that corporate performance is improved when the firm simultaneously exploits a complementary set of related knowledge resources across its business units. In a sample of 303 multibusiness firms, the study finds that synergies arising from product knowledge relatedness, customer knowledge relatedness, or managerial knowledge relatedness do not improve corporate performance on their own. Synergies arising from the complementarity of the three types of knowledge relatedness significantly improve both market-based and accounting-based performance of the multibusiness corporation. Copyright © 2004 John Wiley & Sons, Ltd.