| Abstract: | This paper investigates the basis for a behavioural theory of diversification. A theory of diversification may be required (i) for full analysis of competitive processes, which include innovation and cross-entry competition, and (ii) to understand the selection of diversification projects in individual firms. Alternative optimising and non-optimising models are feasible. The choice between these alternatives will be considered after the non-optimising model has been developed.
Section I outlines the basic model and the general predictions which it generates. In section II the predictions are subjected to a coarse test, which is taken to justify further investigation of the model's properties. The model is developed more fully in section III. |
