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This paper investigates performance differences (in terms of ROA) between related and unrelated diversified firms. Two regression models of performance are estimated using a sample of 80 firms. Performance differences are associated with advertising expenditures, accounting determined risk, research and development expenditures and capital intensity. The models suggest that research and development expenditures are an important determinant in the performance advantage enjoyed by related diversified firms.
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Richard A. Bettis (1981) studied this question.
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