Can firms be both broad and deep? Exploring interdependencies between horizontal and vertical firm scope

Brahm, F, Parmigiani, A and Tarzijan, J (2020) Can firms be both broad and deep? Exploring interdependencies between horizontal and vertical firm scope. Journal of Management. ISSN 0149-2063 (In Press) OPEN ACCESS

Abstract

Firms can be horizontally diversified, with considerable breadth, or vertically integrated, with great depth. This study explores how breadth and depth affect each other as influenced by capability requirements and coordination demands. Using construction industry data, we assess the interdependence between contractors’ portfolios of building types (horizontal scope) and the extent of integration of the activities needed to complete each project (vertical scope). We find that vertical and horizontal scope have a negative interdependency only when contractors face managerial constraints due to coordination challenges. Further, we show that this effect can be mitigated through organizational structures that centralize key functions. Our findings highlight the importance of coordination in the theory of the firm, as we link firm boundaries to managerial coordination and internal organization.

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Item Type: Article
Subject Areas: Strategy and Entrepreneurship
Additional Information:

Copyright © 2020 Southern Management Association. Reprinted by permission of SAGE Publications.

Subjects: M > Management organisation structure
C > Corporate strategy
C > Corporate restructuring
Date Deposited: 09 Mar 2020 13:02
Last Modified: 30 Apr 2020 20:17
URI: http://lbsresearch.london.edu/id/eprint/1382
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