Strategic Divergence Among Sibling Firms: Evidence from Seiko Group in Japan

Although Seiko Epson Corporation (Epson) and Seiko Instruments Inc. (SII) once belonged to the same Seiko group, they followed different growth trajectories as a result of differences in governance structures. Despite sharing a common origin, Epson became independent from the Seiko group and substantially outperformed SII. The purpose of this study is to explain why sibling firms in the same business group diverge strategically over time through a longitudinal comparative case analysis of the two firms, using archival sources together with sales data spanning the period from 1980 to 2024. The findings suggest that strategic divergence resulted from cumulative differences in managerial discretion arising from governance structures. At Epson, governance structures supported greater managerial discretion through stable internal CEO succession, enabling coherent, technology-based growth. In contrast, stronger founding-family influence and frequent CEO turnover constrained managerial discretion at SII, resulting in inconsistent strategies and long-term contraction. By integrating research on governance structures, CEO succession, managerial discretion and CEO characteristics, this study provides a novel explanation for long-term strategic divergence among sibling firms within the same business group.