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  • Cross-Business Synergies: A Typology of Cross-business Synergies and a Mid-range Theory of Continuous Growth

    Synergy Realization

    DISSERTATION of the University of St.Gallen,

    Graduate School of Business Administration, Economics, Law and Social Sciences (HSG)

    to obtain the title of Doctor

    submitted by

    Sebastian Knoll

    from Germany

    Approv on the application of

    Prof. Dr. Günter Müller-Stewens

    and

    Prof. Dr. Gilbert Probst

    Dissertation no.3391

    Betriebswirtschaftlicher Verlag Dr. Th. Gabler / GWV Fachverlage GmbH

    Wiesbaden, 2008

    Oeconomiae

    ed

  • The University of St. Gallen, Graduate School of Business Administration, Economics, Law and Social Sciences (HSG) hereby consents to the printing of the present dissertation, without hereby expressing any opinion on the views herein expressed.

    St. Gallen, October 15, 2007

    The President:

    Prof. Ernst Mohr, PhD

  • Sebastian Knoll

    Cross-Business Synergies

  • GABLER EDITION WISSENSCHAFT

  • Sebastian Knoll

    Cross-Business Synergies A Typology of Cross-Business Synergies and a Mid-Range Theory of Continuous Growth Synergy Realization

    Wirth a foreword by Prof. Dr. Günter Müller-Stewens

    GABLER EDITION WISSENSCHAFT

  • Bibliographic information published by Die Deutsche Nationalbibliothek Die Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data is available in the Internet at .

    1st Edition 2008

    All rights reserved © Betriebswirtschaftlicher Verlag Dr. Th. Gabler | GWV Fachverlage GmbH, Wiesbaden 2008

    Editorial Office: Frauke Schindler / Sabine Schöller

    Gabler-Verlag is a company of Springer Science+Business Media. www.gabler.de

    No part of this publication may be reproduced, stored in a retrieval system or transmitted, mechanical, photocopying or otherwise without prior permission of the copyright holder.

    Registered and/or industrial names, trade names, trade descriptions etc. cited in this publica- tion are part of the law for trade-mark protection and may not be used free in any form or by any means even if this is not specifically marked.

    Cover design: Regine Zimmer, Dipl.-Designerin, Frankfurt/Main Printed on acid-free paper Printed in Germany

    ISBN 978-3-8349-0869-8

    Dissertation Universität St. Gallen, 2008

  • Foreword V

    Foreword

    In recent years, the realization of cross-business synergies grew into a major concern of corporate management.

    Asked about their most pressing issues on the corporate agenda, managers from differ- ent multi-business firms in industries such as telecommunications, engineering, elec- tronics, finance, energy, and automotive, mentioned the realization of cross-business synergies. Nevertheless, ever since Igor Ansoff introduced cross-business synergies into the field in the 1960s, research in strategy and organization has largely neglected their direct investigation. The questions of what cross-business synergies actually are and how they are realized remain largely unexplored.

    With this dissertation, the author aims at closing this gap in two steps. As the concept of synergy in the multi-business firm remains underspecified, he first develops a the- ory-based typology of cross-business synergies. In particular, the author conceptual- izes two new types of cross-business synergies, which contrast with the dominant effi- ciency-focused view of synergy in the multi-business firm (economies of scope): Growth synergies (profitable growth advantages from recombining complementary operative resources across businesses) and corporate management synergies (perform- ance advantages from leveraging corporate management capabilities across busi- nesses). The concept of corporate management synergies is illustrated by a compre- hensive case study of General Electric.

    In a second step, the author focuses on growth synergies and inducts a mid-range the- ory for their continuous realization from a longitudinal in-depth single case study. He suggests that the continuous realization of growth synergies is associated with a strate- gic concept that establishes a selective focus on specific growth synergy opportunities, an organization design that fosters decentralized collaboration between businesses and motivates productive business unit self-interest, and a corporate management approach that guides and balances this self-interest in an evolutionary fashion.

    The primary contribution of this dissertation is new insight into the nature of the cor- porate effect (i.e. value creation at the corporate level). The author further attempts to make a broader contribution to theories of strategy and organization. First, this disser- tation suggests a novel organization design that stimulates business unit self-interest and channels this self-interest on productive cross-business collaborations. Thereby, the author proposes a more differentiated view on the corporate strategy-structure choice of related diversifiers than can be found in the existing literature. Second, by providing new insights into the effective (re)combination of complementary resources across businesses, which is the conceptual mechanism underlying the realization of growth synergies,

  • VI Foreword

    this dissertation advances emerging research on a recombinative rationale of the M- form as well as research on dynamic capabilities, coevolutionary change and cross- business innovation.

    Overall, this study presents interesting insights into the largely unexplored field of cross-business synergies from a strategic and organizational point of view, a field which has so far been left to business-and-society literature. For this reason, the work of Sebastian Knoll advances theory and forms a valuable basis for future research. At the same time, he managed to provide helpful frameworks and tools that make this study equally relevant for business practitioners.

    Prof. Dr. Günter Müller-Stewens

  • Acknowledgements VII

    Acknowledgements

    My time in St. Gallen has been intellectually challenging and extremely enriching, something I would never want to miss. At the heart of this extraordinary experience were the people who accompanied my way. In the name of all, some shall be men- tioned.

    First of all, my thanks go to my doctoral advisor Prof. Dr. Günter Müller-Stewens who played an enormous role in my academic and personal development. Besides sharing his vast expertise in the field of corporate strategy and strategy process he created a motivating atmosphere of trust and inspiration through his relaxed nature and personal way of communicating. Also, I would like to thank him for giving me the freedom to work as an independent strategy consultant and lecturer besides my job at the institute. I greatly enjoyed the close cooperation in research and consulting projects, which was rewarding from a professional as well as a personal point of view.

    I will always appreciate Prof. Dr. Gilbert Probst for kindly accepting to become the co- advisor of this dissertation and for his invaluable advice and support. I am also in- debted to him and his family for the great times I was allowed to share with them in Geneva and for showing me the hotspots of this city. They made my “research sum- mer” in Geneva an unforgettable experience. Finally, my thanks go to Prof. Dr. Chris- toph Lechner and Dr. Torsten Schmid for many challenging and inspiring scientific discussions, to Markus Menz for his excellent feedback on my final draft, and to Inga Voss for dedicated proofreading.

    Like any dissertation, this study would not have been possible without the support of practioners that provided me with the empirical data. In particular, I want to thank the managers from ElectroCorp, my primary disguised case study company, for their time and outsatnding support of my dissertation project. In the name of all I would like to thank Mr. T.F., Mr. S.W, Dr. H.G., Dr. M.K., Mr.M.H., Mr. R.vJ., Mr. U.W., Dr. H.R, and Mr. TC, and Dr. G.F. Furthermore, I am thankful to numerous managers from General Electric, ABB, UBS, Philips, Deutsche Telekom, and Migros for sharing their wisdom and insights on the realization of cross-business synergies.

    My time in St. Gallen was the beginning of many great friendships that will hopefully last for ever. Special thanks go to Dr. Sebastian Frankenberger, Alexander Gradow, Manuel Seyferth, and Dr. Hendrik Vater. I will never forget the fun times we had din- ing, clubbing, skiing, laughing and theorizing. Also, I would like to mention my cousin Dr. Martin Weimann and my long-time Friends Dr. Carsten Intveen, Dr. Ma- thias Kranz, Peter Richter, and Matthias Sander who I could always count on.

    Being aware of the space limitations, I would like to briefly thank the following people for their personal support, intellectual inspiration, and leisurely relief: Dr. Omid Aschari, Michael Bellmer, Jost Bendel, Volker Bernhardt, Doris Brand Hürlimann, Dr. Stepahn Böhm, Silke Bucher, Dr. Malte Dous, Flora Ferlic, Dr. Berislav Gaso, Nicola

  • VIII Acknowledgements

    Gesing, Susanne Hoare Widmer, Sven & Melanie Hoffmann, Dr. Jörg Hofstetter, Florian Hotz (aka Flotzi), Dr. Urs Jäger, Thomas Ketterle, Dr. Katharina Klöckner, Dr. Bastian Körber, Silke auf dem Kampe, Regine Krempl, Isabel Kuschel, Wolfgang Kaufhold, Dr. Marco Lang, Dr. Philipp Lattreuter, Thors