A resource‐based view of interrelationships among organizational groups in the diversified firm

A diversified firm has a number of advantages because it operates in different product or market areas. One of these advantages is based on the potential to develop interrelationships among organizational groups or units in the same firm (intra-organizational linkages). Interrelationships between distinct but related organizational groups represent opportunities for synergy. These opportunities to reduce cost or enhance differentiation through connections between resources are termed tangible and intangible interrelationships. These interactions between activities and skills or know-how of different organizational groups are described as inter-unit interrelationships or internal resource sharing. This paper presents a resource-based view of inter-unit interrelationships in the diversified firm (i.e., intra-organizational linkages). An understanding of resources is central to recognizing how value can be captured when activities and skills or know-how are shared between organizational units. It is important to consider: How resources are utilized; How resources are accumulated; How resources are linked together (bundles of assets). The resources and capabilities that exist as well as those that will be needed in the future must be considered. Strategy and resources must be aligned to achieve synergy (combined effects) and competitive advantage. Copyright © 2004 John Wiley & Sons, Ltd.

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