Does the Diversification–Firm Performance Relationship Change Over Time? A Meta‐Analytical Review

Abstract

We study the relationship between diversification and firm performance in the context of the decline in levels of diversification over time. We argue that the pressure to reduce diversification may have more strongly affected those firms whose diversification strategies were most detrimental to firm performance. We employ meta‐analytical regression (MARA) in order to test our hypotheses, using a total of 267 primary studies containing 387 effect sizes based on 150,000 firm‐level observations from over 60 years of research on the diversification–firm performance relationship. The findings suggest that levels of unrelated diversification have decreased, whereas levels of related diversification have increased since the mid‐1990s, following an initial decrease in the 1970s and 1980s. Furthermore, we find that the relationship between unrelated diversification and firm performance has improved significantly over time, whereas the relationship between related diversification and performance has remained relatively stable.

Meta‐Analytic Research in Management: Contemporary Approaches, Unresolved Controversies, and Rising Standards

“…Carnes et al (2019) use MASEM to test their theorizing about key mediators while Sihag and Rijsdijk (2019) and Karam et al (2019) Maas et al, 2019;Rosenbusch et al, 2019;Wang et al, 2019) leverage external sources (e.g., World Bank) in MARA to investigate how country-level factors shape important relationships, thereby testing hypotheses that might otherwise be cost prohibitive. Finally, Schommer et al (2019) use MARA to show how important relationships changed over 60 years of researchers' investigations.…”

“…A second controversial issue that we encountered is that even though methodological treatments widely recognize that (standardized or unstandardized) regression coefficients (i.e., partial correlations or betas [ß]) (e.g., Hedges and Olkin, 1985;Lipsey and Wilson, 2001;Schmidt and Hunter, 2015) cannot be used as meta-analytic input, doing so has become common practice (e.g., Carney et al, 2011) -including in one paper in the special issue (e.g., Schommer et al, 2019). Embracing partial correlations is attractive because it would allow many more studies to be included, bringing entire literatures that do not report bivariate relationships, such as finance and economics, within the grasp of meta-analysis (Stanley and Doucouliagos, 2012).…”

Innovation Offshoring, Institutional Context and Innovation Performance: A Meta‐Analysis

“…In line with previous research (e.g., Rosenbusch et al, 2011;Klier et al, 2017;Schommer et al, in press), we used a combination of sub-group analysis and MARA. The sub-group analysis allows us to interpret the direction and magnitude of effects in sub-groups.…”

Global strategy gone astray: Maersk's big box boats and the world shipping industry

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