BUSINESS GROUP CORPORATE DIVERSIFICATION: EXTENSION OF A TWO-DIMENSIONAL CONCEPTUALIZATION

Abstract

Studies on unrelatedly diversified business groups in emerging economies have theoretically addressed the drivers of their diversification. However, the extent and type of these groups’ corporate diversification has not been adequately explored. In this paper, we propose an extension of Varadarajan and Ramanujan’s (1987) two-dimensional conceptualization of firm diversity as a useful tool for classifying groups across diversification categories: (1) very low diversifiers, (2) predominantly related diversifiers, (3) predominantly unrelated diversifiers, and (4) very high diversifiers. To illustrate how business groups may be categorized into these categories, we use a sample of family-owned business groups in one emerging market, Turkey. Additionally, we conduct cluster analytic techniques to refine our findings. Our study validates the appropriateness of using the extended conceptual framework and proposes combining its application with the cluster analytic techniques in order to better improve the results. Our work should inspire new studies on business group corporate diversification.