What determines the scope of the firm over time? A focus on institutional relatedness

What determines the scope of the firm? is one of the most fundamental questions in strategic management. We argue that, in addition to product relatedness, a focus on institutional relatedness-defined as an organization's informal linkages with dominant institutions that confer resources and legitimacy-helps answer this question. We address this question both longitudinally (firms in developed and emerging economies over time) and cross-sectionally (developed versus emerging economies), thus contributing to an institution-based theory of corporate diversification.