Technology and business diversification: a survey of theories and empirical evidence

This paper provides a critical review of theoretical and empirical studies on diversification. While previous surveys of the literature have focused either on business diversification or technology diversification, we make a systematic comparison between these two important dimensions of corporate strategy. Our survey accounts for contributions in economics, strategic management and technology management. Although there are variables that affect both technological and business diversification, we argue that strategic choices about technology and business portfolio are largely shaped by distinct factors. These differences reflect some peculiar characteristics of technical knowledge and the imperfections in the market for this intermediate good. These differences explain the persistent gap between technology and business diversification in the world largest multi-product firms. The paper also shows that technology and business diversification interact each other and have different implications for firms’ economic performance