Why do firms exist, anyway?
There are three things I learned from the article:
Mr. Coases theory of “market failure” explains why highly diversified business groups in emerging markets succeed. For example ‘s Tate Group and ‘s Koc Holding.
On the other hand the neo-Coases school argues that firms succeed also because they can marshal a wide range of resources – including such nebulous as “corporate culture” and “collective knowledge”.
And I would like to add one other thing. Michael Porter was not arguing for the business diversification quite the opposite. But he had long time ago admitted that a strong sense of corporate identity is as important as slavish adherence to business units’ financial results if a corporate strategy is to be successful. And corporate culture is an important part of corporate identity.
The Economist, December 18th, 2010. Web post available at: http://www.economist.com/node/17730360
M. Porter in Harvard Business Review, 2001: From competitive advantage to corporate strategy.