Relatedness in the Patterns of Interindustry Diversification

This research examines diversification by considering pairs of origin-target industries, emphasizing the role of a class of variables describing a relationship between origin and target industries. Data are drawn from a data bank established for a Canadian industrial organization research project; a model is specified and regression analysis performed for each of 3 subsamples: 1. producer good industries, 2. consumer convenience, and 3. non-convenience good industries. Results confirm that the trichotomy delineates groups of industries that are behaviorally different and that diversification tends to take place within each of the 3 groups, rather than across groups. In the producer good sector, firm strategies seem dominated by the search for long-term outlets; consumer convenience good makers seem to be far more light-footed, and their strategies do not seem to be so strongly affected by industry specific, technologically determined relationships. In the case of consumer non-convenience industries, evidence indicates that diversified firms might be Canadian subsidiaries of US manufacturers.