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/lp/emerald-publishing/the-effect-of-diversification-on-performance-revisited-how-the-Upkx040kmz
- Publisher
- Emerald Publishing
- Copyright
- Copyright © 2006 Emerald Group Publishing Limited. All rights reserved.
- ISSN
- 1536-5433
- DOI
- 10.2753/JMR1536-5433040102
- Publisher site
- See Article on Publisher Site
Abstract
In this paper, we argue that the effect of diversification on performance is not homogeneous across industries, as previously assumed in the literature on diversification in strategy and finance. We provide empirical evidence that some industries are more friendly environments for diversified firms than for specialists, and vice versa. The implications of this qualification for the diversification‐performance relationship are investigated in this study. The results show that the number of specialists in an industry is an important moderator of the diversification‐performance relationship, and it determines the existence of a positive, negative, or curvilinear relationship. Diversification has a more negative impact on performance as the number of specialized firms in the industries in the sample increases. Although we find clear evidence of the curvilinear relationship between diversification and performance frequently found in strategy research, the relationship seems to be the result of not accounting for the relative dominance of diversifiers versus specialists in the industries in the sample.
Journal
Management Research: The Journal of the Iberoamerican Academy of Management – Emerald Publishing
Published: Apr 1, 2006
Keywords: Diversification; Specialists; Relationships; Performance