Diversified Company Performance: Evidence from the United States Airline Industry

Henrique Machado Barros, Adriana Bortoluzzo () and Lucas Mello de Campos Arruda

RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), 2018, vol. 22, issue 1, 23-45

Abstract: This paper analyzes the effect related diversification strategy has on firm performance. Based on a sample of 70% of US airlines, this piece of research investigates the relationship between the degree of diversification and corporate profitability. Multiple linear regression models of panel data (i.e., 6 years) were tested, with model parameters estimated by the Generalized Method of Moments (GMM) technique. We identified that firm performance followed an inverted-U curvilinear pattern. That is, boundary-spanning activities of related diversified firms increase coordination efforts to the extent that, at some point, the benefits of this strategy are offset.

Date: 2018
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