City Research Online

Abstract

The literature on corporate diversification has often argued for and established the case that companies often overdiversify in a product market sense – i.e. enter into unrelated product markets where they may not fully cover their cost of capital. Yet, even without engaging in unrelated diversification, managers need to make resource allocation decisions to a variety of activities that a company conducts to consummate its business. In this article we focus on Research and Development (R&D) activity and we discuss the effects that the uncertainty, boundary ambiguity, feedback latency, R&D lumpiness and legitimacy that characterize technological contexts can have in making overinvestment in R&D likely. Specifically, in this article we a) draw attention to the construct of activity overinvestment, and specifically R&D overinvestment, b) use the received literature to argue that there exists a prima facie case for examining this construct and its antecedents in order to evaluate the extent and implications of R&D overinvestment, and c) make the more general case that the resource allocation literature needs to study the issue of activity overinvestment systematically.

Publication Type:	Article
Additional Information:	© SAGE Publications.
Publisher Keywords:	Resource allocation/Management, Patents and R&D Strategies, Technology Strategy
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Departments:	Bayes Business School > Management
SWORD Depositor:	Symplectic Administrator

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