Curvilinear Relationship between Diversification and Performance: A Replication and Extension of Previous Research

Abstract

As argued in most strategic management textbooks, the relationship between diversification and performance is curvilinear and firms pursuing a related diversification strategy outperform those firms pursuing a dominant or an unrelated diversification strategy. Using SAS modeling techniques and controlling for industry, corporate and business unit effects new insights were gleaned with regards to the relationship between diversification and performance. The implications to performance (statistical significance), given the type and extent of diversification strategies, are discussed resulting in a deeper understanding of how the complex relationships between performance and diversification play out across the entire diversification spectrum.