Turning Digital: Diversification in UK Design Consultancy Services
AbstractWhy do small firms in emerging industries choose to diversify? Theories of strategic management suggest that diversification is driven by search for exogenous market opportunities, deployment of slack resources, or the exploitation of current knowledge. Institutional organization theory suggests that firms may diversify for reasons unrelated to performance, such as by mimicking similar firms. We analyse the diversification of small UK design consultancies into the field of digital design between 1996 and 2009, a period characterized by the dot-com 'boom', 'bust' and recovery. Panel data analyses reveal that financial performance had little causal impact upon diversification. Instead, most firms diversified into digital design triggered by internal growth aspirations or by the following of similar firms. We contribute to the literature on small firm growth and diversification by highlighting the interactive nature of strategic and institutional drivers to diversification, and their relationship with firms' internal growth aspirations.
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Bibliographic InfoPaper provided by ESRC Centre for Business Research in its series ESRC Centre for Business Research - Working Papers with number wp413.
Date of creation: Sep 2010
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Diversification; Business Services; SMEs; Market Entry;
Find related papers by JEL classification:
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
- L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
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