Product Diversity and Firm Performance: An Empirical Investigation

This study employs categorical measures of broad spectrum diversity (BSD) and mean narrow spectrum diversity (MNSD) to classify firms into broad diversification strategy groups. The BSD and MNSD measures of firm diversity are based on SIC data pertaining to each firm's scope of activities at the two- and four-digit levels. The 10 largest firms in each of the 24 largest industries of the U.S. constitute the sample for this study. Performance differences between diversification strategy groups are examined in reference to their long-term return on equity, return on total capital, sales growth rate, and earnings per share growth rate.