We characterize internal capital market when divisions compete over internal resources, when the types of divisions are correlated, and when the divisions can divert outputs. The correlation measures the degree of diversification to indicate how much divisions are related. Thus, this paper generates theories about diversification as well as internal capital market. The headquarters collects information first, and then implements winner picking. In those two roles of headquarters exists the main economic tradeoff of this paper. We find that focus is more efficient organizational form than diversification, as divisions receive coarser signal about their future outputs, the size of internal capital market is larger, projects becomes more lucrative, economy becomes better and divisions divert output more easily. The higher the attractiveness of focus is, the higher the extent of socialism in internal capital market. Yet, the focus itself tends to weaken the socialism.