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Diversification strategy, profit performance and the entropy measure
Abstract
Several industrial organization studies, using diversification index measures, examined corporate diversification and economic performance and failed to find any significant relationship between them. Rumelt and other strategy researchers used a semisubjective classification scheme and uncovered a systematic relationship between diversification strategies and performance. This study combines the strengths of the index approach, namely, simplicity, objectivity and replicability, with the essential richness of Rumelt's methodology. Using the Jacquemin‐Berry entropy measure of diversification and the line‐of‐business data, this study finds that firms with predominantly related diversification show significantly better profit growth than firms with predominantly unrelated diversification.
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Citations
Cited by
Hitt, M. A., Hoskisson, R. E., & Kim, H. (1997) · Academy of Management Journal · doi:10.2307/256948 · Cited by 2,855
Power in Top Management Teams: Dimensions, Measurement, and Validation
Finkelstein, S. (1992) · Academy of Management Journal · doi:10.5465/256485 · Cited by 2,389
Ramos‐Rodríguez, A., & Ruíz‐Navarro, J. (2004) · Strategic Management Journal · doi:10.1002/smj.397 · Cited by 1,626
Carpenter, M. A., & Westphal, J. D. (2001) · Academy of Management Journal · doi:10.2307/3069408 · Cited by 1,312
Tallon, P. P., & Pinsonneault, A. (2011) · MIS Quarterly · doi:10.2307/23044052 · Cited by 1,187
Metadata
- Authors
- Palepu, K.
- Venue
- Strategic Management Journal
- Publisher
- Wiley
- Published
- 1985-07
- Volume
- 6
- Issue
- 3
- Pages
- 239-255
- ISSN
- 0143-2095 (ISSN-L)
- 1097-0266
- OpenAlex
- W2040198418
- Cited by
- 1,572
- References
- 0
- FWCI
- 36.86
- Type
- journal article
- Language
- en
- Open access
- closed
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- Palepu, K. (1985). Diversification strategy, profit performance and the entropy measure. Strategic Management Journal. https://doi.org/10.1002/smj.4250060305
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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