Diversification strategy determines both the scope of a firm's activities and the logic of portfolio composition. It is a cornerstone of corporate strategy, and, according to prevailing theory, it is of paramount relevance for performance.

Frithjof Pils presents an overview of the empirical research on the linkage between diversification strategy and performance. The author uses multiple methods of quantitative meta-analysis and examines the nature of the relationships between diversification strategies and accounting-based, market-based, and growth-based performance. Subsequently, he applies multiple methods of empirical data analysis on a dataset of 350 multi-business firms to express the diversification discount and other measures of performance as a function of different types of business relatedness and core business industry. Ultimately, a two-dimensional model of the relatedness construct that comprises relatedness at the strategic level as well as at the operational level is derived. Based on the results, the author shows implications for the interpretation of past research, the design of future research including the use of meta-analysis methodologies, as well as management practice.

Autorentext
Dr. Frithjof Pils promovierte bei Prof. Dr. Andreas Bausch am Lehrstuhl für Strategic Management and Controlling (European Utility Management) an der Jacobs University, Bremen. Er ist als Unternehmensberater bei The Advisory House tätig.

Zusammenfassung
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 author's me- odological knowledge.

Inhalt
Research Problems, Objectives, and Structure.- Meta-Analysis on the Relationship between Diversification and Performance.- Types of Operational Relatedness, Core Business Industry,and Performance.- A Two-Factor Model of Operational Relatedness and Strategic Relatedness.- Summary.