Firm scope and position moves: exploration, inertia, and crowding

Abstract We examine the effect of changes in a firm’s horizontal scope on its position moves, disentangling the effect of scope economies, exploration, inertia, and crowding. We argue that scope economies emanate from the contemporaneous breadth of a firm’s scope while exploration and inertia relate to the sequence of historical choices a firm makes about whether to change or maintain its scope. Our theory predicts that exploration routines (that promote position moves) and inertial tendencies (