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Redirecting research efforts on the diversification-performance linkage: The search for synergy

Ahuja, G. & Novelli, E. (2017). Redirecting research efforts on the diversification-performance linkage: The search for synergy. The Academy of Management Annals, 11(1), pp. 342-390. doi: 10.5465/annals.2014.0079


We review the literature on the diversification-performance (D-P) relationship to a) propose that the time is ripe for a renewed attack on understanding the relationship between diversification and firm performance, and b) outline a new approach to attacking the question. Our paper makes four main contributions. First, through a review of the literature we establish the inherent complexities in the D-P relationship and the methodological challenges confronted by the literature in reaching its current conclusion of a non-linear relationship between diversification and performance. Second, we argue that to better guide managers the literature needs to develop along a complementary path – whereas past research has often focused on answering the big question of does diversification affect firm performance, this second path would focus more on identifying the precise micro-mechanisms through which diversification adds or subtracts value. Third, we outline a new approach to the investigation of this topic, based on (a) identifying the precise underlying mechanisms through which diversification affects performance; (b) identifying performance outcomes that are “proximate” to the mechanism that the researcher is studying, and (c) identifying an appropriate research design that can enable a causal claim. Finally, we outline a set of directions for future research.

Publication Type: Article
Additional Information: This is an Accepted Manuscript of an article published by Taylor & Francis in Academy of Management Annals on 18/01/2017, available online:
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Departments: Bayes Business School > Management
Text - Accepted Version
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