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Turning Digital: Diversification in UK Design Consultancy Services

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  • Wennberg, K.
  • Tether, B.
  • Li, C.
  • Mina, A.

Abstract

Why 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 Info

Paper provided by ESRC Centre for Business Research in its series ESRC Centre for Business Research - Working Papers with number wp413.

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Date of creation: Sep 2010
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Handle: RePEc:cbr:cbrwps:wp413

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Related research

Keywords: Diversification; Business Services; SMEs; Market Entry;

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  1. Henrik Berglund, 2007. "Opportunities As Existing And Created: A Study Of Entrepreneurs In The Swedish Mobile Internet Industry," Journal of Enterprising Culture (JEC), World Scientific Publishing Co. Pte. Ltd., vol. 15(03), pages 243-273.
  2. Coviello, Nicole & Munro, Hugh, 1997. "Network relationships and the internationalisation process of small software firms," International Business Review, Elsevier, vol. 6(4), pages 361-386, August.
  3. Karl Wennberg, 2009. "Knowledge combinations and the survival of financial services ventures," Journal of Evolutionary Economics, Springer, vol. 19(2), pages 259-276, April.
  4. Johan Wiklund & Dean Shepherd, 2003. "Aspiring for, and Achieving Growth: The Moderating Role of Resources and Opportunities," Journal of Management Studies, Wiley Blackwell, vol. 40(8), pages 1919-1941, December.
  5. Klevorick, Alvin K. & Levin, Richard C. & Nelson, Richard R. & Winter, Sidney G., 1995. "On the sources and significance of interindustry differences in technological opportunities," Research Policy, Elsevier, vol. 24(2), pages 185-205, March.
  6. Arora, Ashish & Arunachalam, V. S. & Asundi, Jai & Fernandes, Ronald, 2001. "The Indian software services industry," Research Policy, Elsevier, vol. 30(8), pages 1267-1287, October.
  7. Antonelli, Cristiano, 1999. "The Evolution of the Industrial Organisation of the Production of Knowledge," Cambridge Journal of Economics, Oxford University Press, vol. 23(2), pages 243-60, March.
  8. Delmar, Frederic & Shane, Scott, 2004. "Legitimating first: organizing activities and the survival of new ventures," Journal of Business Venturing, Elsevier, vol. 19(3), pages 385-410, May.
  9. James O. Fiet, 2007. "A Prescriptive Analysis of Search and Discovery," Journal of Management Studies, Wiley Blackwell, vol. 44(4), pages 592-611, 06.
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