The Economics and Management of Technological Diversification

The Economics and Management of Technological Diversification

The Economics and Management of Technological Diversification

The Economics and Management of Technological Diversification

Synopsis

Recently, initial attempts have been made to understand the patterns of corporate technological diversification and their implications on economic and managerial dimensions. This book consolidates these attempts.

Excerpt

This book has grown out of ongoing discussions since the mid-1990s among a group of economists and management scholars on the puzzling nature of diversification in industry. Diversification with its many facets is at the core of the evolution of companies. Diversification has in fact more distant origins than the internationalisation of companies, despite the virtues of specialisation hailed since Adam Smith. in other words multiproduct corporations (MPCs) predate multinational corporations (MNCs) as a phenomenon. At the same time most research, and there has been quite a lot of it, has not been able to show any strong positive links between product diversification and economic performance in terms of growth and profitability, quite the contrary. From being fashionable in the 1960s in the us and somewhat later in Europe, diversification fell completely out of fashion in the 1980s in the West, being replaced by its antidote specialisation, while it continued to flourish another decade or so in Japan and most NICs or near-NIC countries. Some observers even claimed diversification was the engine of the high-tech miracle in Japan, or at least a necessity for catching up. Thus, a number of questions arose. Are there different types of diversification, having different effects on economic growth? Had the pendulum of fashion in management and strategy swung too far, first towards diversification and then later back towards specialisation, wasting economic energy by overshooting? Is diversification a more suitable recipe for firms in developing countries that are catching up? Also more theoretical questions arose. in light of the resource-based view of the firm, should not resource diversification and its links with product diversification be addressed? Some research had pointed to the virtues of technology-related product diversification and the pivotal role of technological diversification for growth, even for highly specialised companies.

Questions like these were raised and discussed in a series of meetings, in Göteborg, Sweden 1997, Pisa, Italy 1998 and Pisa 2000, supplemented by various other informal meetings. Our group benefited from also becoming part of a related EU-funded project on "Dynamic capabilities, growth and long-term competitiveness of European firms: a diagnosis and the implications for eu policies" (Dynacom) which was coordinated by

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