Abstract
Two logics of managing diversification have been suggested in the strategic management literature. The first is a very economic and structural approach that emphasizes the contingency fit between strategy and structural arrangements to maximize organizational effectiveness, while the second is a cultural approach that focuses on the use of strong shared values to minimize opportunistic behaviors of members. This paper empirically examines and compares the efficacy of two approaches to managing diversification, by using Taiwanese business groups as the sample. It is found that both approaches can lead to satisfied economic performance and they are supplementary. Diversified firms employing simultaneously two management logics will outperform firms with only one logic.
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