Do Institutions Really Matter for the Relationship Between Diversification and Performance? A Meta-Analytical Approach

Scholars have tried to explain different diversification patterns in different parts of the world through an institutions-based view of firm scope. This view’s claim is that the institutional context moderates the relationship between diversification and performance in such a way that diversification in developing and emerging markets is more profitable than in developed markets. However, empirical results are still inconclusive, it is unclear which institutional factors matter, and if institutional effects have become weaker over time. Using a meta-analytic approach based on 464 published and unpublished studies, we shed light on these issues. Our findings show that formal institutions matter more than informal ones but that their effect is becoming weaker. Thus, we contribute to the diversification literature and the institutions-based theory of firm scope.