The competitive advantage of business units: Evidence from the integrated circuit industry

Within-business diversification, product strategies, and competitors' innovative behavior may affect the competitive advantage of business units that operate in the integrated circuit industry. This investigation employs original data about new product introductions and sales from a representative sample of companies. In addition, the study's empirical taxonomy can deal with significant product heterogeneity, which many previous contributions overlook. Econometric analysis shows that corporate diversification within a market segment affects the competitive advantage of constituting units positively. Increased product variety also enables business units to gain a competitive edge over rivals. However, new product introductions by sister units in other market niches impair the performance of a focal unit. A higher propensity to innovate among rival firms also erodes the advantage of a focal unit, whereas positive spillovers arise from other firms' innovations in neighboring market segments.