Unique demand complementaries: resource relatedness and market connectedness as divers of value creation in diversification

Abstract

The article discusses the development of a systematic framework to describe demand-based strategies to diversification and to compare it with supply-side-based strategies. The concept of unique demand complementarity is proposed to capture the idea that companies sell two or more products to the same customers, and possess the unique capability to provide value for customers who buy both products. By contrasting unique demand complementarities with cost-based economies of scope, a conceptual difference between them is found for business expansion. The difference between the performance effect of unique demand complementarities and the performance effect of economies of scope are also considered.