A diversified firm needs to decide which businesses to include in its business portfolio and how to achieve synergies across those businesses so that its corporate performance is greater than the sum of individual performances of its businesses. We argue that traditional conceptualizations and underlying constructs of diversification—which have been developed and refined at the heights of the industrial economy—may be inadequate and inappropriate for understanding diversification, and diversification-performance relationship in the digital economy. We propose a knowledge-based conceptualization of diversification, and develop a research framework for understanding diversification-performance relationship in the digital economy. We argue that knowledge-based diversification strategies, which build and leverage related product, customer, managerial, and IT knowledge across business units, can lead to superior performance.
Tanriverdi, Huseyin, "Rethinking the Basis of Diversification in the Digital Economy" (2000). AMCIS 2000 Proceedings. 272.