Commitment, Product Market Diversity, and Performance: An Intraindustry Analysis

Previous empirical diversification research has largely ignored the combined effect of inputand output diversity as drivers of financial performance. In view of this gap, the present paper provides an empirical analysis of the link between intraindustry commitment, diversity of the firm’s product market portfolio and performance. We suggest that commitment constrains the ability to diversify, and that product market diversity can be evaluated with respect to the extent that increases in diversity lead to increases in coordination costs. Our results suggest that commitment to physical assets and technology choice drives product and product line diversity. Furthermore, financial performance increases in product diversity and tends to decrease in the number of product lines.