The effect of diversification on performance revisited: diversification discount, premium, or both?

Manuel Becerra () and Juan Santaló ()
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Manuel Becerra: Instituto de Empresa
Juan Santaló: Instituto de Empresa
Authors registered in the RePEc Author Service: Juan Santalo

Working Papers Economia from Instituto de Empresa, Area of Economic Environment

Abstract: In this paper we argue conceptually and show empirically that the effect of diversification on performance is not homogeneous across industries, as previously assumed in the literature on diversification in strategy and finance. Some industries may be more friendly environments for diversified firms than for specialists, or vice versa. After replicating the main findings in finance and strategy, we show that the number of specialists in an industry is an important moderator of the diversification-performance relationship, which determines the existence of a diversification discount, a premium, or the curvilinear relationship frequently found in strategy research.

Keywords: Diversification; Empirical research; Performance (search for similar items in EconPapers)
Pages: 20 pages
Date: 2004-12
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Persistent link: https://EconPapers.repec.org/RePEc:emp:wpaper:wp04-36

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