The resource-based perspective on firm diversification, subsequent to Penrose (1959), has focused primarily on the fungibility of resources across domains. We make a clear analytical distinction between scale-free capabilities and those that are subject to opportunity costs and must be allocated...

Compared to the large-scale enterprises of the past, digital firms tend to be narrower in their vertical scope (hyperspecialization) but larger in their scale (hyperscaling). We explain this phenomenon through a theory about the simultaneous impetus towards scale and specialization created by...