A corporation has a corporate advantage if the collection of businesses owned together
is more valuable than the sum of the values of the individual businesses owned in
isolation from one another
Two mechanisms of corporate strategy
1. selection mechanism: portfolio assembly
2. synergy mechanism: business modification
two factors shaped by selection mechanism
1. firm boundaries
2. level of diversification
two factors shaped by synergy mechanism
1. synergies between businesses
2. innovation
➢ Role of corporation in dynamic capability view
corporations add to rent-generating potential through control, coordination, and
organization - they act as a (dynamic) capability, and drive (VRIN) resource
creation
❖ dynamic capabilities
the firm's processes - specifically the processes to integrate, reconfigure, gain, and
release resources - to match and even create market change
3 features of dynamic capabilities
1. built rather than bought in the market
2. embedded in the organization
3. likely to be path-dependent routines
4 types of dynamic capability
1. reconfiguration (support activities, core processes)
2. leveraging
3. learning (provoked, encouraged)
4. integration
• Reconfiguration
, transforming and recombining resources by consolidation of support activities
and by achieving economies of scale in core processes across BUs
♦ Leveraging
extending the scope of resources into other BUs
♦ Learning
encouraging creation of new resources (supporting innovation, allowing
exploration, introducing new knowledge) and provoking resource creation
through controls
♦ Integration
integrating resources by pooling resources of different BUs and by encouraging cross-BU
collaboration
❑ 5 design parameters of dynamic capabilities
1. BU strategic autonomy
2. BU strategic similarity
3. coordination across levels
4. coordination across BUs
5. performance measures and BU orientation
❑ 6 resource creation configurations
1. provoked learning configuration
2. encouraged learning configuration
3. reconfiguring support activities
4. reconfiguring core processes
5. leverage configuration
6. creative integration configuration
Operational synergy
potentially exists if two businesses operated jointly are more valuable than the two
businesses operated independently, where 'operated jointly' implies that decisions
across the two businesses are coordinated with the aim of enhancing joint value
2 types of synergy
1. one-sided
2. two-sided
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