Marketing

Economics

Business

Diversification (marketing strategy)

Economic geography

Industrial organization

Strategic Management Journal

Summary The economic theory of barriers to entry is integrated with the corporate strategy concept oJ relatedness, to develop a model of the choice between internal detvelopment and acquisition in div ersification entry into new+ markets. The model is tested on original data collected for this studY from PIMS Program participants. These original data coter the parent companY characteristics, entryl strategy- and entrY outcomle Jor 59 entrants into 31 markets. These entry-related data are merged with existing PIMS data on the structure of the entered markets and their incumbents. Results oJ binarY regression analysis show1 that the choice betwt een the two entry modes is wt-ell explained bY measures of barriers and relatedness. Higher barriers are more lik-ely, to be associated with acquisition entry. Greater relatedness is more likely to be associated writh direct entrv.

Diversification entry: Internal development versus acquisition