Technological Resources and the Direction of Corporate Diversification: Toward an Integration of the Resource-Based View and Transaction Cost Economics

HBS Working Paper No. 99-019

39 Pages Posted: 5 Sep 1998

See all articles by Brian S. Silverman

Brian S. Silverman

University of Toronto - Rotman School of Management

Date Written: July 1998

Abstract

This study considers how a firm's resource base affects the choice of industries into which the firm diversifies. It offers two main extensions of prior research. First, it operationalizes technological resources at a more detailed level than in prior studies, thereby enabling a more stringent analysis of the direction of diversification. This analysis shows that the predictive power of the "resource-based view of the firm" is greatly improved when resources are measured at a finer level. Second, the study integrates principles from transaction cost economics into resource-based predictions concerning diversification. In particular, it tests the common assumption that rent-generating resources are too asset-specific to allow contracting. The findings point to circumstances where resources can be, and are, exploited through contracting rather than through diversification.

JEL Classification: L22, O3

Suggested Citation

Silverman, Brian S., Technological Resources and the Direction of Corporate Diversification: Toward an Integration of the Resource-Based View and Transaction Cost Economics (July 1998). HBS Working Paper No. 99-019, Available at SSRN: https://ssrn.com/abstract=120328 or http://dx.doi.org/10.2139/ssrn.120328

Brian S. Silverman (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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