Nicolai Foss

Description

Research talk by Prof. Nicolai Foss

Paper talk: THE DARK SIDE OF RELATEDNESS: RESOURCE CHARACTERISTICS, HIERARCHICAL FAILURE, AND DIVERSIFICATION OUTCOMES


Diversification is one of the most heavily researched subjects in strategy research. The dominant view in strategy is that diversification emerges because of market failures associated with trading flexible firm resources that are in excess. However, this view is incomplete, as it does not consider that the reasons resources may give rise to market failure are also the reasons they may cause hierarchical failure. A symmetric theory requires a comparative-institutional framework that considers the costs of internal governance of resources. While flexible resources are linked to value-creating related diversification, they also impose costs when they are difficult to measure, monitor, and control in use. This means that it is difficult to set transfer prices and that their use may be subject to strategic behaviors. Thus, related diversification based on such resources has a “dark side”—the hierarchical failure associated with flexible resources—which may help to explain the inconclusive findings of diversification-performance research. We theorize the hierarchical failure associated with flexible resources, examine the comparative-institutional implications of such failure in terms of the scope of diversification, and discuss how firms can deploy internal governance mechanisms that reduce the dark side of diversification.

Period	28 Nov 2025
Visiting from	Copenhagen Business School (Denmark)
Visitor degree	PhD
Degree of Recognition	National