DIVERSIFIED EXPANSION BY LARGE ESTABLISHED FIRMS

This paper examines the argument that growth and diversification in large established firms result from a process of matching a firm's lumpy and ever-changing resources with dynamic market opportunities. The analysis shows that rapidly growing firms with broad resource bases are the most likely to pursue diversified expansion. In doing so, these firms tend to enter markets where the (often high) resource requirements are similar to their own resource capabilities. These results are consistent with some of Penrose's observations on the growth of fims, but challenge some precepts of traditional entry barrier theory. © 1991.