Resources, Adjustments, and Diversification: Evidence from Production Functions
The Resource-Based View of the firm (RBV) posits as a necessary condition for diversification that a firm's resources can be leveraged beyond its original business. To achieve sufficiency we need to know whether the resource is bes...
Main Author: | |
---|---|
Format: | Working Paper |
Language: | en_US |
Published: |
2003
|
Subjects: | |
Online Access: | http://hdl.handle.net/1721.1/1813 |
_version_ | 1811085656303075328 |
---|---|
author | Wernerfelt, Birger |
author_facet | Wernerfelt, Birger |
author_sort | Wernerfelt, Birger |
collection | MIT |
description | The Resource-Based View of the firm (RBV) posits as a necessary condition for
diversification that a firm's resources can be leveraged beyond its original business. To
achieve sufficiency we need to know whether the resource is best leveraged inside the
firm or through a market contract. We therefore couple the RBV with the
Adjustment-Cost Theory of the firm to make and test a set of predictions about when
firms should extend their scope. We find that firm should, and do, extend their
hosizontal and vertical scope when they compete in industries with more fast paced
new product development. Two strong points about the study are (1) Because we are
specific about the theory of the firm invoked, we can make more precise predictions,
and (2) we test the predictions in production functions as well as in estimates of actual
firm scope |
first_indexed | 2024-09-23T13:13:10Z |
format | Working Paper |
id | mit-1721.1/1813 |
institution | Massachusetts Institute of Technology |
language | en_US |
last_indexed | 2024-09-23T13:13:10Z |
publishDate | 2003 |
record_format | dspace |
spelling | mit-1721.1/18132019-04-12T08:22:42Z Resources, Adjustments, and Diversification: Evidence from Production Functions Wernerfelt, Birger Diversification Theory of the Firm Resource-based View The Resource-Based View of the firm (RBV) posits as a necessary condition for diversification that a firm's resources can be leveraged beyond its original business. To achieve sufficiency we need to know whether the resource is best leveraged inside the firm or through a market contract. We therefore couple the RBV with the Adjustment-Cost Theory of the firm to make and test a set of predictions about when firms should extend their scope. We find that firm should, and do, extend their hosizontal and vertical scope when they compete in industries with more fast paced new product development. Two strong points about the study are (1) Because we are specific about the theory of the firm invoked, we can make more precise predictions, and (2) we test the predictions in production functions as well as in estimates of actual firm scope 2003-02-03T17:00:52Z 2003-02-03T17:00:52Z 2003-02-03T17:00:52Z Working Paper http://hdl.handle.net/1721.1/1813 en_US MIT Sloan School of Management Working Paper;4277-03 182445 bytes application/pdf application/pdf |
spellingShingle | Diversification Theory of the Firm Resource-based View Wernerfelt, Birger Resources, Adjustments, and Diversification: Evidence from Production Functions |
title | Resources, Adjustments, and Diversification: Evidence from Production Functions |
title_full | Resources, Adjustments, and Diversification: Evidence from Production Functions |
title_fullStr | Resources, Adjustments, and Diversification: Evidence from Production Functions |
title_full_unstemmed | Resources, Adjustments, and Diversification: Evidence from Production Functions |
title_short | Resources, Adjustments, and Diversification: Evidence from Production Functions |
title_sort | resources adjustments and diversification evidence from production functions |
topic | Diversification Theory of the Firm Resource-based View |
url | http://hdl.handle.net/1721.1/1813 |
work_keys_str_mv | AT wernerfeltbirger resourcesadjustmentsanddiversificationevidencefromproductionfunctions |