Internal Development
Modes of changing corporate scope
Session 5 begins the second module of the course. In the first module we discussed the boundaries of the firm — whether synergies (joint operation) were best managed within a single firm, or between firms in a market with a contractual relationship of some sort. In this second module, we shift attention to modes (or pathways) for achieving these boundaries. A firm with one business unit may decide that it needs to create specific synergies (based on their strategy) with a business or business unit of another type. But it must decide whether to rely on internal development, use an alliance or joint venture with an existing business (we will discuss the differences between these, and the logic for each, in the next session), or acquire or merge with an existing business. In session 7, along with mergers and acquisitions, we will discuss spin-offs and sell-offs as modes of divestiture, when the scope of the firm needs to be reduced.
In this session, focused on internal development, we will take several perspectives on the choice of mode. First, we will consider trade-offs between accessing resources externally versus developing them internally, to identify conditions that favor internal development. Then we will shift our focus to the resource pathways framework, for a more concise treatment of the question. Finally, we will…
