This paper examines the impact of the symbiotic relationship between diversification breadth and mode on firm performance. Seventy‐three Fortune 500 firms were classified by diversification breadth (related/unrelated) and mode (internal/external) and their performance during the period 1975–84 analyzed on four financial performance measures. The two related categories (related‐internal/related‐external) were generally higher performers than the two unrelated categories (unrelated‐internal/unrelated‐external) as hypothesized, but the differences were not significant on most performance measures. The unrelated‐external category appears to be the worst performer, which presents a dilema since this strategy has dominated the conglomerate movement.
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Paul Simmonds (1990) studied this question.
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