The risk implications of diversification: Integrating the effects of product and geographic diversification

  • The risk implications of product diversification have received considerable attention from scholars. However, our understanding of the effects of geographic diversification on risk is more limited. Relying on resource-based theory to frame our arguments, we argue that despite some similarities, the two types of diversification have differing effects on firm risk. We first establish the risk reducing effects for product diversification. We then integrate the unique aspects of geographic diversification that serve as a boundary condition to the RBV perspective, arguing for the risk increasing effects of geographic diversification. Finally, since many firms pursue both forms of diversification simultaneously, we explore the joint effects of both product and geographic diversification. We test our hypotheses in a longitudinal model on a sample of S&P 500 firms. Our findings suggest that total product diversification, as well as related diversification reduce risk, while total geographic diversification increases risk. Furthermore, ourThe risk implications of product diversification have received considerable attention from scholars. However, our understanding of the effects of geographic diversification on risk is more limited. Relying on resource-based theory to frame our arguments, we argue that despite some similarities, the two types of diversification have differing effects on firm risk. We first establish the risk reducing effects for product diversification. We then integrate the unique aspects of geographic diversification that serve as a boundary condition to the RBV perspective, arguing for the risk increasing effects of geographic diversification. Finally, since many firms pursue both forms of diversification simultaneously, we explore the joint effects of both product and geographic diversification. We test our hypotheses in a longitudinal model on a sample of S&P 500 firms. Our findings suggest that total product diversification, as well as related diversification reduce risk, while total geographic diversification increases risk. Furthermore, our data provide evidence of a complex combination of joint effects of these two forms of diversification. These findings offer a more complete understanding of the risk effects of corporate diversification.show moreshow less

Export metadata

Additional Services

Search Google Scholar
Metadaten
Author:Jan Mammen, Todd M. Alessandri, Martin WeissORCiD
DOI:https://doi.org/10.1016/j.lrp.2019.101942
ISSN:0024-6301
Parent Title (English):Long Range Planning
Publisher:Elsevier BV
Document Type:Article
Language:English
Date of first Publication:2019/11/10
Reviewed:Begutachtet/Reviewed
Release Date:2024/07/29
Tag:Firm risk; Geographic diversification; Product diversification; Resource-based view
Volume:54
Issue:1
Article Number:101942
Pagenumber:17
institutes:Fakultät Betriebswirtschaft
Research Themes:Soziale & ökonomische Transformation
Verstanden ✔
Diese Webseite verwendet technisch erforderliche Session-Cookies. Durch die weitere Nutzung der Webseite stimmen Sie diesem zu. Unsere Datenschutzerklärung finden Sie hier.