ISB

Excessive Relatedness is as Difficult as Unrelated Diversification: Evidence from Private Equity Platforms
By Prothit Sen, Sai Jakkaraju, Vivek Tandon
Citation
Sen, Prothit., Jakkaraju, Sai., Tandon, Vivek. (2025). Excessive Relatedness is as Difficult as Unrelated Diversification: Evidence from Private Equity Platforms .
Copyright
2025
Share:
Abstract
This study examines corporate portfolio implementation in private equity (PE) "buy-and-build" platforms by distinguishing resource similarity and complementarity. While RBV links relatedness to performance, it conflates these dimensions, overlooking their distinct managerial demands. Integrating the attention-based view (ABV) with RBV, we explore how similarity and complementarity create attention trade-offs that complicate portfolio development. Using novel PE-specific measures—financial correlations for similarity and input-output interdependencies for complementarity—we analyze a proprietary dataset of PE platforms. Results show that platforms prioritizing either dimension implement faster than unrelated portfolios, but extreme relatedness increases implementation time, aligning with ABV predictions. Mechanism tests highlight external stimuli: cost pressures (e.g., high taxes) drive similarity-based scale expansion, while revenue opportunities (e.g., GenAI boom) propel complementarity-driven scope strategies, especially in digital sectors. This study advances corporate portfolio theory by addressing measurement challenges and highlighting trade-offs between scale and scope synergies in inorganic portfolio development.
Additional information
Contributions
Prothit Sen

Prothit Sen is an Assistant Professor of Strategy at the Indian School of Business, Hyderabad. Professor Sen’s research focuses on corporate strategy, corporate governance, and organization design with AI-Human collaboration. Professor Sen’s research has been published in top-tier peer reviewed management journals like the Strategic Management Journal, Academy of Management Annals, and featured in premier business outlets such as Forbes, and practitioner journals such as California Management Review.

Professor Sen obtained his PHD from INSEAD, Singapore. Prior to his PHD, Professor Sen worked as a consultant for Bain & Company, India. His consultancy experience spanned across the manufacturing, automotive, IT services, and private equity sectors. Professor Sen holds an MBA from the London Business School and a B.Sc. (Hons.) in Physics from St. Stephen’s College, Delhi.

Prothit Sen