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Technological Resources and the Direction of Corporate Diversification: Toward an Integration of the Resource-Based View and Transaction Cost Economics

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  • Brian S. Silverman

    (Harvard Business School, Morgan Hall 243, Soldiers Field, Boston, Massachusetts 02163)

Abstract

This study considers how a firm's resource base affects the choice of industries into which the firm diversifies. It offers two main extensions of prior research. First, it operationalizes technological resources at a more detailed level than in prior studies, thereby enabling a more stringent analysis of the direction of diversification. This analysis shows that the predictive power of the "resource-based view of the firm" is greatly improved when resources are measured at a finer level. Second, the study integrates principles from transaction cost economics into resource-based predictions concerning diversification. In particular, it tests the common assumption that rent-generating resources are too asset specific to allow contracting. The findings point to circumstances where resources can be and are exploited through contracting rather than through diversification.

Suggested Citation

  • Brian S. Silverman, 1999. "Technological Resources and the Direction of Corporate Diversification: Toward an Integration of the Resource-Based View and Transaction Cost Economics," Management Science, INFORMS, vol. 45(8), pages 1109-1124, August.
  • Handle: RePEc:inm:ormnsc:v:45:y:1999:i:8:p:1109-1124
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    File URL: http://dx.doi.org/10.1287/mnsc.45.8.1109
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    References listed on IDEAS

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    11. Montgomery, Cynthia A. & Hariharan, S., 1991. "Diversified expansion by large established firms," Journal of Economic Behavior & Organization, Elsevier, vol. 15(1), pages 71-89, January.
    12. Narin, Francis & Noma, Elliot & Perry, Ross, 1987. "Patents as indicators of corporate technological strength," Research Policy, Elsevier, vol. 16(2-4), pages 143-155, August.
    13. Cynthia A. Montgomery, 1994. "Corporate Diversificaton," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 163-178, Summer.
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