Contraction for the Sake of Expansion: An Oxymoron?

Niron Hashai, Netanel Drori, Christian Geisler Asmussen

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International and business diversification are two common strategies of firms. We present novel theoretical arguments and empirical evidence suggesting that contracting a given diversification path (be it in the international or business dimension), does not only allow firms to expand the other path in the short term, but also to again diversify the initially contracted path, thereby expanding both diversification paths in the long term. We argue and show that when firms contract a given diversification path, they spark two subsequent processes: They free up non-scale free resources from the contracted diversification path to invest in the other diversification path, which allows them to expand this path. In turn, this expansion creates new scale free resources that also facilitate renewed diversification along the initially contracted path.
Original languageEnglish
Title of host publicationProceedings of the Eightieth Annual Meeting of the Academy of Management
EditorsGuclu Atinc
Number of pages1
Place of PublicationBriarcliff Manor, NY
PublisherAcademy of Management
Publication date2020
Publication statusPublished - 2020
EventThe Academy of Management Annual Meeting 2020: Broadening Our Sight - Virtual
Duration: 7 Aug 202011 Aug 2020
Conference number: 80


ConferenceThe Academy of Management Annual Meeting 2020
Internet address
SeriesAcademy of Management Proceedings

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