Diversification and Performance: Linking Relatedness, Market Structure, and the Decision to Diversify

摘要: An extensive empirical literature in strategy and finance studies the performance implications of corporate diversification. Two core debates concern existence a diversification discount relative importance industry relatedness market structure for diversifiers. We address these by building formal model which extent is endogenous depends on degree relatedness. Firms' choices affect both their own competitiveness structure. find non-monotonic effect performance: while greater increases diversified firms, it can also spur additional diversification, thereby eroding performance. In this way, our theory elucidates how heterogeneity firm scope strategies emerge even when firms are initially identical. use to generate data show negative give rise spurious inference cross-sectional regressions. extend lead entry exit dynamics. A second extension investigates conditions under resource endowments make more or less likely diversify.