Impact of industry sector on corporate diversification and firm performance: Evidence from Indian business groups

Abstract

Prior business group (BG) studies implicitly assume that corporate diversification-firm performance relationships are uniform across industry sectors. This generalization may lead to research implications that are not equally true for BG-affiliated manufacturing and service firms. Drawing on strategy and marketing literature, this research addresses this scholarly gap. Our empirical analysis of a large sample of BG-affiliated Indian firms over a five-year period (2004-2008) indicates that the influence of corporate diversification on firm performance is greater for affiliated service firms than affiliated manufacturing firms. Results also indicate that the influence of BG size and diversity on diversification-firm performance relationship varies significantly depending on whether the focal firm belongs to the manufacturing or service sector. Firm's share ownership does not generate similar influence. Copyright � 2015 ASAC. Published by John Wiley & Sons, Ltd. Copyright � 2015 ASAC. Published by John Wiley & Sons, Ltd.