Keywords

Bayesian analysis, diversification, leadership, performance, resource-based view

Abstract

We propose a new application of the resource-based view (RBV) that is more consistent with Penrose's (1959) original framework. We use that framework to study the relationship between diversification and refocusing strategies and economic performance. We propose that the RBV may be enhanced by the explicit recognition of Penrose's two classes of resources, administrative and productive resources. This distinction suggests a focus on the administrative decisions of managers, including the multiple decisions associated with diversification and refocusing strategies, which lead to economic performance. Second, we argue that RBV theory is a theory about extraordinary performers or outliers, not averages. Therefore, the statistical methods used in applying the theory must account for individual firm differences, rather than based on means, which statistically neutralize firm differences. We introduce a novel Bayesian Hierarchical method to examine actions taken by new CEOs and the resulting effects on economic performance over time. The unique feature of this Bayesian method is it allows us to make meaningful probability statements about the diversification and refocusing strategies of individual firms.

Original Publication Citation

Perry, L.T., Hansen, M.H., Reese, C.S., and Pesci, G. (2005). Diversification and Focus: A Bayesian Application of the Resource-Based View. Schmalenbach Business Review, 57: 304-319.

Document Type

Peer-Reviewed Article

Publication Date

2005

Publisher

Schmalenbach Business Review

Language

English

College

Marriott School of Business

Department

Marketing

University Standing at Time of Publication

Assistant Professor

Download

Share

COinS