TYPES OF UNRELATED DIVERSIFICATION IN MODERN BUSINESS-GROUPS

Not only the types of strategic resources, but also the methods of sourcing resources are found to result in heterogeneous firm performances. Not all unrelated diversifications are same either. There are strong serial and cross-sectional dynamics about the execution of various practices of unrelated diversification. The definition of performance also dynamically changes across different business groups. The existing literature focuses on how corporate diversification creates value, using measures of relatedness as moderating variables. We contribute to the research by classifying diversification practices, investigating their performance and recommending how to undertake unrelated diversification. What makes some unrelated diversification successful and others disastrous? Only a few studies focus on how to implement unrelated diversification to improve financial performance and the social impact of firms. Two concepts have been developed for the classification of unrelated diversification methods, namely, the method of accumulation and the style of value growth. The concept of the style of accumulation is developed using the resource approach of the company (accumulation against the acquisition of strategic factors). The value growth style is designed based on the difference between the value and growth of firms and the concept of industry life cycles. Two concepts are proposed to describe the practice of unrelated diversification: the style of accumulation and the style of value growth. The article contains proposals on how to implement unrelated diversification. 4 types of diversification practices that generate various social consequences are analyzed. The relationship between diversification practices and productivity has been demonstrated by different models, which vary according to business combination and time. Firms consider not only their financial data, but also their social impact on cross-sectoral value added and job creation in determining their overall efficiency. In addition, differences were found in the effectiveness of diversification strategies and in determining the effectiveness of activities in different organizations and over time. The results of the study give rise to a number of important management consequences. First, all types of unrelated diversification are not the same. Therefore, each type of unrelated diversification should be treated differently. Second, the types of resources and the ways in which core strategic resources and competencies are obtained can lead to heterogeneity in performance. There are at least two ways to obtain strategic resources: acquisition of strategic factors in the markets and accumulation over time. It is proved that the method of obtaining strategic resources is as important as the resources that the firm uses to explain the heterogeneous activities of the firm.