Diversification, Relatedness, and Performance

A large body of business strategy literature examines the relationship between (pr- uct) diversification and firm performance. From a conceptual point of view, increasing levels of diversification should have positive effects on firm performance, particularly due to economies of scope and scale, market power influence, and risk reduction. At the same time, diversifiers have to cope with substantial negative effects associated with increasing complexity. Unsurprisingly, the results of extensive empirical analyses of diversification effects on performance are somewhat contradictory. Against this background, Frithjof Pils answers two central research questions: First, what overall relationship exists between diversification strategies and firm performance? Secondly, what newly developed indicators of business relatedness can add to the understanding of the performance implications of diversification strategies? Frithjof Pils chooses a topic which is of high practical relevance since the decision in which businesses a firm wants to be in is at the core of corporate strategy. His research objectives are well developed based on a sound description of the current research status. The empirical approaches applied reflect a suitable research design in order to answer the research questions at hand. The combination of narrative review, me- analysis and primary empirical research indicates the wide range of the authors me- odological knowledge.