Business Model Diversification, Resource Relatedness, and Firm Performance

Despite the recognition that many firms operate multiple business models at the same time, little is known about when and how business model diversification may create value. In this study, we develop the construct of business model relatedness and examine its relationship with firm performance. Using a unique panel dataset of multibusiness firms in the retail- and wholesale-trade sectors (1997-2010), we find that the extent to which business model diversification is related increases firm performance. Interestingly, results also show that business model relatedness is more influential in determining firm performance than industry relatedness. This finding suggests that the concept of business model relatedness may be better able to capture the underlying resource relatedness among lines of business than the traditionally used concept of industry relatedness.