Within-industry diversification and firm performance—an S-shaped hypothesis

• Autores: Niron Hashai
• Localización: Strategic management journal, ISSN 0143-2095, Vol. 36, Nº 9, 2015, págs. 1378-1400
• Idioma: inglés
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• Resumen

  • This study shows that the interplay between “adjustment costs”, “coordination costs” and within-industry diversification benefits, results in an S-shaped relationship between within-industry diversification and firm performance. At low levels of within-industry diversification, coordination costs are negligible but “adjustment costs” are higher than the synergy benefits of a limited product scope, hence leading to negative performance outcomes. At moderate levels of within-industry diversification synergies between related product categories substantially increase and outweigh the rise in adjustment and coordination costs, resulting in positive performance outcomes. Yet, extensive within-industry diversification gives rise to considerable coordination costs, which, coupled with adjustment costs, outweigh synergy effects and hamper performance. The study further shows that a greater change rate of within-industry diversification results in negative performance outcomes