CLS summary
- 10 questions cases
- 20 questions papers
Contents
Paper 1: SYNERGY, COORDINATION COSTS, AND DIVERSIFICATION CHOICES (Zhou, 2011)..................2
Paper 2: WITHIN-INDUSTRY DIVERSIFICATION AND FIRM PERFORMANCE—AN S-SHAPED HYPOTHESIS
- HASHAI (2015)......................................................................................................................................3
Paper 3: AMBIDEXTERITY UNDER SCRUTINY: EXPLORATION AND EXPLOITATION VIA INTERNAL
ORGANIZATION, ALLIANCES, AND ACQUISITIONS (STETTNER and LAVIE, 2014)....................................5
Paper 4: How do pre-entrants to the industry incubation stage choose between alliances and
acquisitions for technical capabilities and specialized complementary assets? (Moeen, Mitchell 2020)
................................................................................................................................................................6
Paper 5: DISENTANGLING THE PERFORMANCE EFFECTS OF EFFICIENCY AND BARGAINING POWER IN
HORIZONTAL GROWTH STRATEGIES: AN EMPIRICAL INVESTIGATION IN THE GLOBAL RETAIL
INDUSTRY (MOATTI,REN, ANAND, DUSSAUGE, 2015)............................................................................8
Paper 6: Acquisition Motives and the Distribution of Acquisition Performance (Rabier, 2017)...........10
Paper 7: FEMALE BOARD REPRESENTATION AND CORPORATE ACQUISITION INTENSITY (CHEN,
CROSSLAND, HUANG, 2017).................................................................................................................11
Paper 8: Ripple Effects of CEO Awards: Investigating the Acquisition Activities of Superstar CEOs’
Competitor (Shi,Zhang, Hoskisson 2017)..............................................................................................12
Paper 9: Adding by Subtracting: The Relationship Between Performance Feedback and Resource
Reconfiguration Through Divestitures (Vidal, Mitchell, 2021)..............................................................14
Paper 10: Legacy Divestitures: Motives and Implications (Feldman, 2014)..........................................16
Cases:...................................................................................................................................................17
1
,Paper 1: SYNERGY, COORDINATION COSTS, AND
DIVERSIFICATION CHOICES (Zhou, 2011)
•Key question: what factors determine the limits to related diversification? limits of related
diversification are understudied.
•Focus on related diversification: Input sharing as a source of both synergistic gains and
coordination costs
–The role of Complexity as a factor limiting the diversification (its effect on synergies and
coordination costs)
Theories:
–Theory of the firm (the boundaries of the firm)
•Transaction cost economics (TCE)
Sharing common inputs across business lines can potentially generate synergy that
justifies related diversification. The pursuit of such synergy through diversification is,
however, fundamentally driven by the indivisibility of inputs between firms.
Following Penrose’s insight, it is argued that to realize this synergy, a firm needs to
actively manage the interdependencies between different business lines, which, in
turn, increases its coordination costs
The coordination costs may increase faster than synergy and set a limit to related
diversification. This is particularly salient when the firm’s existing business lines
already have complex interdependencies among them
The results show that a firm is more likely to diversify into a new business when its
existing business lines can potentially share more inputs with the new business;
however, the firm is less likely to diversify into any new business when its existing
business lines are complex.
Importantly, the firm’s likelihood of diversifying into a new business decreases more
with the complexity in the firm’s existing business lines if they share more inputs with
the new business.
These results suggest that increasing coordination costs counterbalance the potential
synergistic benefits associated with related diversification.
3 managerial implications:
1. In making diversification choices, a firm needs to balance the potential synergy with
the associated coordination costs and evaluate in particular the impact of complexity.
2. Because a firm’s overall coordination capacity is limited, its scope choices may be
substitutive: a firm may not expand into all markets where it can apply excess
resources, since doing so will impose coordination burden on the company.
3. The observed heterogeneity across firms in their scope of integration and
diversification suggests that firm-specific organizational capabilities may offset some
limitations of coordination costs.
2
, Paper 2: WITHIN-INDUSTRY DIVERSIFICATION AND FIRM
PERFORMANCE—AN S-SHAPED HYPOTHESIS - HASHAI
(2015)
Article focuses on interplay between within-industry diversification (=related diversification),
coordination costs (result from the need to share resources and create effective linkages
between product categories) and adjustment costs (represent inefficiencies in transferring &
adapting resources to different product categories). These concepts are also the main cost
drivers of within-industry diversification.
•Sources of synergistic benefits:
–Intangible assets (knowledge) sharing → scope economies
•Coordination (share and link, =Zhou (2010)) vs. adjustment (transfer and adapt)
costs: Scale versus non-scale free resources
Theories
–Population ecology •Liabilities of newness and aging (also smallness), organizational inertia
–Industry life-cycle
–Time compression diseconomies
This study shows that the interplay between “adjustment costs”, “coordination costs”
and within-industry diversification benefits, results in an S-shaped relationship
between within-industry diversification and firm performance. At low levels of within-
industry diversification, coordination costs are negligible but “adjustment costs” are
higher than the synergy benefits of a limited product scope, hence leading to negative
performance outcomes
At moderate levels of within-industry diversification synergies between related product
categories substantially increase and outweigh the rise in adjustment and
coordination costs, resulting in positive performance outcomes.
Yet, extensive within-industry diversification gives rise to considerable coordination
costs, which, coupled with adjustment costs, outweigh synergy effects and hamper
3
- 10 questions cases
- 20 questions papers
Contents
Paper 1: SYNERGY, COORDINATION COSTS, AND DIVERSIFICATION CHOICES (Zhou, 2011)..................2
Paper 2: WITHIN-INDUSTRY DIVERSIFICATION AND FIRM PERFORMANCE—AN S-SHAPED HYPOTHESIS
- HASHAI (2015)......................................................................................................................................3
Paper 3: AMBIDEXTERITY UNDER SCRUTINY: EXPLORATION AND EXPLOITATION VIA INTERNAL
ORGANIZATION, ALLIANCES, AND ACQUISITIONS (STETTNER and LAVIE, 2014)....................................5
Paper 4: How do pre-entrants to the industry incubation stage choose between alliances and
acquisitions for technical capabilities and specialized complementary assets? (Moeen, Mitchell 2020)
................................................................................................................................................................6
Paper 5: DISENTANGLING THE PERFORMANCE EFFECTS OF EFFICIENCY AND BARGAINING POWER IN
HORIZONTAL GROWTH STRATEGIES: AN EMPIRICAL INVESTIGATION IN THE GLOBAL RETAIL
INDUSTRY (MOATTI,REN, ANAND, DUSSAUGE, 2015)............................................................................8
Paper 6: Acquisition Motives and the Distribution of Acquisition Performance (Rabier, 2017)...........10
Paper 7: FEMALE BOARD REPRESENTATION AND CORPORATE ACQUISITION INTENSITY (CHEN,
CROSSLAND, HUANG, 2017).................................................................................................................11
Paper 8: Ripple Effects of CEO Awards: Investigating the Acquisition Activities of Superstar CEOs’
Competitor (Shi,Zhang, Hoskisson 2017)..............................................................................................12
Paper 9: Adding by Subtracting: The Relationship Between Performance Feedback and Resource
Reconfiguration Through Divestitures (Vidal, Mitchell, 2021)..............................................................14
Paper 10: Legacy Divestitures: Motives and Implications (Feldman, 2014)..........................................16
Cases:...................................................................................................................................................17
1
,Paper 1: SYNERGY, COORDINATION COSTS, AND
DIVERSIFICATION CHOICES (Zhou, 2011)
•Key question: what factors determine the limits to related diversification? limits of related
diversification are understudied.
•Focus on related diversification: Input sharing as a source of both synergistic gains and
coordination costs
–The role of Complexity as a factor limiting the diversification (its effect on synergies and
coordination costs)
Theories:
–Theory of the firm (the boundaries of the firm)
•Transaction cost economics (TCE)
Sharing common inputs across business lines can potentially generate synergy that
justifies related diversification. The pursuit of such synergy through diversification is,
however, fundamentally driven by the indivisibility of inputs between firms.
Following Penrose’s insight, it is argued that to realize this synergy, a firm needs to
actively manage the interdependencies between different business lines, which, in
turn, increases its coordination costs
The coordination costs may increase faster than synergy and set a limit to related
diversification. This is particularly salient when the firm’s existing business lines
already have complex interdependencies among them
The results show that a firm is more likely to diversify into a new business when its
existing business lines can potentially share more inputs with the new business;
however, the firm is less likely to diversify into any new business when its existing
business lines are complex.
Importantly, the firm’s likelihood of diversifying into a new business decreases more
with the complexity in the firm’s existing business lines if they share more inputs with
the new business.
These results suggest that increasing coordination costs counterbalance the potential
synergistic benefits associated with related diversification.
3 managerial implications:
1. In making diversification choices, a firm needs to balance the potential synergy with
the associated coordination costs and evaluate in particular the impact of complexity.
2. Because a firm’s overall coordination capacity is limited, its scope choices may be
substitutive: a firm may not expand into all markets where it can apply excess
resources, since doing so will impose coordination burden on the company.
3. The observed heterogeneity across firms in their scope of integration and
diversification suggests that firm-specific organizational capabilities may offset some
limitations of coordination costs.
2
, Paper 2: WITHIN-INDUSTRY DIVERSIFICATION AND FIRM
PERFORMANCE—AN S-SHAPED HYPOTHESIS - HASHAI
(2015)
Article focuses on interplay between within-industry diversification (=related diversification),
coordination costs (result from the need to share resources and create effective linkages
between product categories) and adjustment costs (represent inefficiencies in transferring &
adapting resources to different product categories). These concepts are also the main cost
drivers of within-industry diversification.
•Sources of synergistic benefits:
–Intangible assets (knowledge) sharing → scope economies
•Coordination (share and link, =Zhou (2010)) vs. adjustment (transfer and adapt)
costs: Scale versus non-scale free resources
Theories
–Population ecology •Liabilities of newness and aging (also smallness), organizational inertia
–Industry life-cycle
–Time compression diseconomies
This study shows that the interplay between “adjustment costs”, “coordination costs”
and within-industry diversification benefits, results in an S-shaped relationship
between within-industry diversification and firm performance. At low levels of within-
industry diversification, coordination costs are negligible but “adjustment costs” are
higher than the synergy benefits of a limited product scope, hence leading to negative
performance outcomes
At moderate levels of within-industry diversification synergies between related product
categories substantially increase and outweigh the rise in adjustment and
coordination costs, resulting in positive performance outcomes.
Yet, extensive within-industry diversification gives rise to considerable coordination
costs, which, coupled with adjustment costs, outweigh synergy effects and hamper
3
