Does the Diversification–Firm Performance Relationship Change Over Time? A Meta‐Analytical Review

29 Pages Posted: 14 Dec 2018

See all articles by Monika Schommer

Monika Schommer

EBS Universität für Wirtschaft und Recht - EBS Business School

Ansgar Richter

University of Liverpool - Management School (ULMS)

Amit Karna

Indian Institute of Management Ahmedabad

Date Written: January 2019

Abstract

We study the relationship between diversification and firm performance in the context of the decline in levels of diversification over time. We argue that the pressure to reduce diversification may have more strongly affected those firms whose diversification strategies were most detrimental to firm performance. We employ meta‐analytical regression (MARA) in order to test our hypotheses, using a total of 267 primary studies containing 387 effect sizes based on 150,000 firm‐level observations from over 60 years of research on the diversification–firm performance relationship. The findings suggest that levels of unrelated diversification have decreased, whereas levels of related diversification have increased since the mid‐1990s, following an initial decrease in the 1970s and 1980s. Furthermore, we find that the relationship between unrelated diversification and firm performance has improved significantly over time, whereas the relationship between related diversification and performance has remained relatively stable.

Keywords: diversification, corporate refocusing, firm performance, meta‐analysis

Suggested Citation

Schommer, Monika and Richter, Ansgar and Karna, Amit, Does the Diversification–Firm Performance Relationship Change Over Time? A Meta‐Analytical Review (January 2019). Journal of Management Studies, Vol. 56, Issue 1, pp. 270-298, 2019. Available at SSRN: https://ssrn.com/abstract=3300985 or http://dx.doi.org/10.1111/joms.12393

Monika Schommer (Contact Author)

EBS Universität für Wirtschaft und Recht - EBS Business School ( email )

Gustav-Stresemann-Ring 3
65189 Wiesbaden, Hessen
Germany

Ansgar Richter

University of Liverpool - Management School (ULMS) ( email )

Chatham Street
Liverpool, L69 7ZH
United Kingdom
44 [0]151 795 3713 (Phone)
44 [0]151 795 3001 (Fax)

Amit Karna

Indian Institute of Management Ahmedabad ( email )

Vastrapur
Ahmedabad, Gujarat 380 015
India

HOME PAGE: http://stdwww.iimahd.ernet.in/~karna

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1
Abstract Views
84
PlumX Metrics