The success of related diversification is not a given. Although synergies between a firm's businesses may exist, problems can arise in the sharing of key resources and capabilities as the firm attempts to exploit the synergies. To achieve success in related diversification, firms often leverage their organizational slack, or resources and capabilities that are in excess of the level demanded by their normal operations. However, sharing is difficult when firms have insufficient organizational slack, and this can lead to an overstretching of shared resources. Through case study methodology, this paper investigates how one technological SME managed its limited organizational slack while engaged in related diversification. Particular attention is given to the mechanisms that contribute to diversification failure. Consideration is also given to how the capability life-cycle may affect capability sharing in related diversification efforts.
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