Essays on New Venture Diversification

Product-diversification research has proliferated for decades and has been conducted in a variety of organizational settings, industries, and countries. Nevertheless, this literature has remained firmly entrenched within the context of large and well-established ventures. As such, we know little about the ramifications of product-diversification for new ventures. This dissertation is aimed at filling this knowledge gap. The central research question of the dissertation is: what are the consequences of a firm being product-diversified at the time of founding? In pursuit of the answer to this question, three essays were produced. The first essay defines new venture diversification and draws upon multiple existing literatures to inform the concept as well as formulate propositions on relationships between new venture diversification and other salient constructs within the entrepreneurship literature. The second essay focuses the lens on a specific outcome by theoretically and empirically investigating the effect of new venture diversification on firm survival. In testing the effect on a world-wide sample of microfinance firms, the results suggest that new venture diversification is detrimental to survival rates and that this relationship is moderated by financial resource levels. The third essay investigates the relationship between new venture diversification and financial stability. Through an analysis of the same sample of microfinance firms, the results show that greater diversification produces increased financial stability for new ventures. The conclusions of the dissertation are as follows: 1) firms can and often do begin product-diversified, 2) new venture diversification has ramifications for important firm outcomes, 3) there are both positive and negative consequences of beginning diversified, and 4) current theorizing on diversification does not fully apply to new ventures