Diversification and Firm Performance in the Digitalization Era. Examining the Role of Internal Capabilities and Board Capital

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2018-07-09
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en
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The thesis investigates the impact of external board capital, i.e. the social capital of external directors serving in the board of a company, on its diversification strategy. It is argued that through that network of contacts firms can overcome complexities and uncertainties in their environment when contemplating entering new markets. Additionally, it is hypothesized that the current performance might also motivate the choice to diversify in a sense that when it is unsatisfactory, firms are more prone to pursue new businesses, whereas this motivation declines as performance increases. Companies diversify with the prospect of improving profitability through spreading risks and creating synergies. However, since the strategy entails quite some costs, diversifiers should strive for an optimal fit with their internal capabilities which act as mediators in the diversification-performance mechanism in order to ensure profitability. The analysis has been done on a sample of 119 IT firms for a 10-year period. The findings indicate that board capital is a powerful driver for diversification while the diversification-performance relationship is not so straightforward. There are some indications of non-linearity and mediation. Based on the analysis future research directions and recommendations for practitioners are derived.
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Faculteit der Managementwetenschappen
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