Dynamic capability-based diversification: Implications for economy of scope

Abstract

Recent theories on diversification emphasize the importance of resource sharing to achieve economy of scope in new business. However, this view neglects the fact that firms sometimes diversify by utilizing dynamic capability, producing new resources for new business. This paper draw on both dynamic capability and diversification literature to provide a conceptual framework for dynamic capability-based diversification, and shows a new type of economy of scope between two independent businesses.