Jack of All Trades or Master of One: Specialization vs. Generalization in Business Models for Social Impact

Aparajita Agarwal, PhD Candidate, The Wharton School

Abstract: Horizontal scope—the set of products and services offered—is a potential source of competitive advantage for firms, but also involves organizational trade-offs. On the one hand, a broad product portfolio helps firms generate more value from the sharing and redeployment of activities across products/ services and provides consumers greater utility through one-stop access, reducing their search and transaction costs. On the other hand, the need for higher coordination and communication results in lower product quality and reduced managerial attention, thereby giving an advantage to firms that specialize. If the benefits of a generalized vs. specialized product portfolio are less than obvious for firms’ financial performance – the key outcome measure studied for decades by management scholars, then it is even less obvious as to what implications this strategic choice has when firms extend the value function to social impact creation. In this project, we examine the assumptions that underlie our understanding of profit maximizing firms and test whether product/service scope has different implications for social impact creation. This has both theoretical and practical implications for business model innovation that aims to deliver both financial and social value.