Introduction

Corporate diversification1 is a ubiquitous feature of the modern economic landscape. For most US firms, “[a] long-term continuing strategy of growth [has been based on] expansion into new geographical or product markets” (Chandler 1992: 83). The expansion of corporate boundaries to include new lines of business has occurred not only within large Fortune 500 corporations (Rumelt 1974) but also within many smaller firms (Teece et al. 1994).2 Despite the prevalence of multiproduct corporations, however, until recently there has been little theory with which to explain or predict diversification.