Approximating Relatedness from a Business Model Perspective: Towards a Taxonomic Approach

Despite sustained scholarly efforts for almost half a century, the definition and measurement of “relatedness” as a key concept in diversification research are impeded by a whole bunch of conceptual and methodical limitations. This article attempts to rectify three major concerns voiced by diversification scholars. First, the distinction between industries, devised in the industrial era, is blurring in today’s business environment, making their use for the study of diversification problematic. Second, most conceptualizations of relatedness employ a particularistic perspective and are thus bound to miss central aspects that are outside the scope of their theoretical vantage point. Third, the increasingly pervasive consensus that relatedness should be viewed as a multifaceted construct has not been adequately captured so far. To overcome these limitations, this study draws on the burgeoning concept of the business model as a new and more meaningful way to capture relatedness. The viability of the resulting construct, business model relatedness, is explored both conceptually and by a first empirical test. This study contributes to two theoretical strands of literature: In the field of diversification, it proposes an innovative way to conceptualize relatedness that is based on a taxonomic—as opposed to a typological—approach and that promises to better reflect firms’ actual diversification logics; in business model research, it introduces a novel approach to investigating the performance implications of managing multiple business models.