Diversification and Performance: Critical Review and Future Directions*

This article uses an integrative theoretical framework to review existing empirical research on the diversification-performance relationship along the three different research streams which have studied this relationship. the article highlights the considerable diversity in the findings across studies in each stream and identifies certain key theoretical and methodological issues which might help to explain the observed diversity. Also discussed is a contingency-based perspective and several useful directions for future research.

[1]  D. Teece.  ECONOMIES OF SCOPE AND THE SCOPE OF THE ENTERPRISE , 1980 .

[2]  Cynthia A. Montgomery,et al.  Diversification strategy and systematic risk , 1984 .

[3]  H. Donald Hopkins,et al.  Firm Diversity: Conceptualization and Measurement , 1982 .

[4]  Dennis C. Mueller,et al.  The effects of conglomerate mergers : A survey of the empirical evidence , 1977 .

[5]  R. W. Melicher,et al.  The Performance of Conglomerate Firms: Recent Risk and Return Experience , 1973 .

[6]  James M. Hulbert,et al.  Corporate diversity and economic performance: The impact of market specialization , 1988 .

[7]  K Palepu.  多角化戦略,収益性業績,エントロピー測度 , 1985 .

[8]  D. Hambrick.  An Empirical Typology of Mature Industrial-Product Environments , 1983 .

[9]  R. Grant.  On 'Dominant Logic', Relatedness and the Link between Diversity and Performance , 1988 .

[10]  S. L. Barton.  DIVERSIFICATION STRATEGY AND STRATEGY SYSTEMATIC RISK: ANOTHER LOOK. , 1988 .

[11]  R. Reed,et al.  Confirmation of the Specialization ratio , 1987 .

[12]  Robert E. Hoskisson,et al.  Multidivisional Structure and Performance: The Contingency of Diversification Strategy , 1987 .

[13]  Wilbur G. Lewellen.  A PURE FINANCIAL RATIONALE FOR THE CONGLOMERATE MERGER , 1971 .

[14]  Robert M. Grant,et al.  Performance differences between the wrigley/rumelt strategic categories , 1988 .

[15]  Kathryn Rudie Harrigan,et al.  Research Methodologies for Contingency Approaches to Business Strategy , 1983 .

[16]  R. E. Shrieves,et al.  Conglomerate Performance Using the Capital Asset Pricing Model , 1972 .

[17]  Bruce T. Lamont,et al.  Mode of Corporate Diversification and Economic Performance , 1985 .

[18]  R. Bühner,et al.  THE INFORMATION CONTENT OF CORPORATE DISCLOSURES OF DIVISIONALIZATION DECISIONS [1] , 1985 .

[19]  A. Jacquemin,et al.  Entropy Measure of Diversification and Corporate Growth , 1979 .

[20]  Y. Suzuki.  The Strategy and structure of top 100 Japanese industrial enterprises 1950–1970 , 1980 .

[21]  R. Higgins,et al.  CORPORATE BANKRUPTCY AND CONGLOMERATE MERGER , 1975 .

[22]  Cynthia A. Montgomery,et al.  Product-Market Diversification and Market Power , 1985 .

[23]  A. Hirschman.  THE PATERNITY OF AN INDEX , 1964 .

[24]  P. Helmberger,et al.  Estimation of Structure-Profit Relationships with Application to the Food Processing Sector , 1971 .

[25]  Robert K. Kazanjian,et al.  Implementing Internal Diversification: Contingency Factors for Organization Design Choices , 1987 .

[26]  David J. Teece,et al.  Towards an economic theory of the multiproduct firm , 1982 .

[27]  George S. Yip.  Diversification entry: Internal development versus acquisition , 1982 .

[28]  Sidney L. Barton,et al.  Diversification Strategy and Systematic Risk: Another Look , 1988 .

[29]  D. Beattie.  Conglomerate diversification and performance: a survey and time series analysis , 1980 .

[30]  Henry Mintzberg,et al.  The Structure of "Unstructured" Decision Processes , 1976 .

[31]  John R. Carter,et al.  In Search of Synergy: A Structure-Performance Test , 1977 .

[32]  R. Mason,et al.  Performance of Conglomerate Firms: A Portfolio Approach , 1976 .

[33]  R. Amit,et al.  RESEARCH NOTES. DIVERSIFICATION AND THE RISK-RETURN TRADE-OFF. , 1988 .

[34]  D. Ravenscraft.  Structure-Profit Relationships at the Line of Business and Industry Level , 1983 .

[35]  K. R. Harrigan.  An Application of Clustering for Strategic Group Analysis , 1985 .

[36]  Peter H. Grinyer,et al.  Strategy, Structure, the Environment, and Financial Performance in 48 United Kingdom Companies , 1980 .

[37]  D. Lecraw,et al.  Diversification Strategy and Performance , 1984 .

[38]  O. Joy,et al.  CONGLOMERATION AND DIVERSIFICATION , 1981 .

[39]  S. Rhoades,et al.  A Further Evaluation of the Effect of Diversification on Industry Profit Performance , 1974 .

[40]  Y. Amihud,et al.  Risk Reduction as a Managerial Motive for Conglomerate Mergers , 1981 .

[41]  Gareth R. Jones,et al.  Transaction cost analysis of strategy‐structure choice , 1988 .

[42]  P. Rajan Varadarajan,et al.  Diversification and Measures of Performance: Additional Empirical Evidence , 1987 .

[43]  R. A. Miller.  Market Structure and Industrial Performance: Relation of Profit Rates to Concentration, Advertising Intensity, and Diversity , 1969 .

[44]  J. Weston,et al.  TESTS OF THE EFFICIENCY PERFORMANCE OF CONGLOMERATE FIRMS , 1971 .

[45]  Sayan Chatterjee,et al.  Types of Synergy and Economic Value: The Impact of Acquisitions on Merging and Rival Firms , 1986 .

[46]  S. Sitkin,et al.  Corporate Acquisitions: A Process Perspective , 1986 .

[47]  R. Reed,et al.  Diversification in British industry in the 1970s , 1982 .

[48]  Richard A. Bettis,et al.  Diversification Strategy, Accounting Determined Risk, and Accounting Determined Return , 1982 .

[49]  James F. Nielsen,et al.  The Effects of Conglomerate Merger Activity on Systematic Risk , 1974, Journal of Financial and Quantitative Analysis.

[50]  N. Venkatraman,et al.  Contingency Perspectives of Organizational Strategy: A Critical Review of the Empirical Research , 1985 .

[51]  Cynthia A. Montgomery,et al.  The Measurement of Firm Diversification: Some New Empirical Evidence , 1982 .

[52]  Cynthia A. Montgomery,et al.  Corporate acquisition strategies and economic performance , 1987 .

[53]  A. Jacquemin,et al.  Inter-industry Variations in the Effect of Trade on Industry Performance , 1988 .

[54]  R. Bettis.  Performance differences in related and unrelated diversified firms , 1981 .

[55]  Anil K. Gupta,et al.  Business Unit Strategy, Managerial Characteristics, and Business Unit Effectiveness at Strategy Implementation , 1984 .

[56]  Ali R. Malekzadeh,et al.  Acculturation in Mergers and Acquisitions , 1988 .

[57]  C. C. Snow,et al.  Measuring Organizational Strategies: Some Theoretical and Methodological Problems , 1980 .

[58]  H. J. Arnold.  Moderator variables: A clarification of conceptual, analytic, and psychometric issues , 1982 .

[59]  A. Barnea,et al.  Stock-Market Based Measures of Corporate Diversification , 1973 .

[60]  C. Prahalad,et al.  The dominant logic: A new linkage between diversity and performance , 1986 .

[61]  Raphael Amit,et al.  Diversification strategies, business cycles and economic performance , 1988 .

[62]  Michael Lubatkin,et al.  Merger strategies and stockholder value , 1987 .

[63]  John H. Grant,et al.  Construct Measurement in Organizational Strategy Research: A Critique and Proposal , 1986 .

[64]  R. Pitts.  Strategies And Structures For Diversification , 1977 .

[65]  D. Round,et al.  A Comparison of Diversifying and Nondiversifying Australian Industrial Firms , 1984 .

[66]  Cynthia A. Montgomery,et al.  Corporate economic performance: Diversification strategy versus market structure , 1981 .

[67]  Howard Thomas,et al.  DIVERSITY, DIVERSIFICATION, AND PROFITABILITY AMONG BRITISH MANUFACTURING COMPANIES, 1972-84 , 1988 .

[68]  S. Rhoades.  The Effect of Diversification on Industry Profit Performance in 241 Manufacturing Industries: 1963 , 1973 .

[69]  Jeffrey L. Kerr.  Diversification Strategies and Managerial Rewards: An Empirical Study , 1985 .

[70]  R. Duane Ireland,et al.  RELATIONSHIPS AMONG CORPORATE LEVEL DISTINCTIVE COMPETENCIES, DIVERSIFICATION STRATEGY, CORPORATE STRUCTURE AND PERFORMANCE , 1986 .

[71]  Peter A. Prosper,et al.  Conglomerate Mergers and Public Policy , 1971 .

[72]  Raphael Amit,et al.  Diversification and the Risk-Return Trade-off , 1988 .

[73]  John J. Clark,et al.  Merger Types and Shareholder Returns: Additional Evidence , 1980 .

[74]  R. Rumelt,et al.  Diversification strategy and profitability , 1982 .

[75]  Michael Lubatkin,et al.  Merger Strategies and Capital Market Risk , 1987 .

[76]  R. Schmalensee.  Do Markets Differ Much , 1984 .

[77]  P. H. Friesen,et al.  Innovation in Conservative and Entrepreneurial Firms: Two Models of Strategic Momentum , 1982 .

[78]  K. Palepu.  Diversification strategy, profit performance and the entropy measure , 1985 .

[79]  Peter R. Richardson,et al.  Implementing the unrelated product strategy , 1982 .

[80]  V. Mahajan,et al.  Risk/Return Performance of Diversified Firms , 1985 .