Past research on the relationship between diversification and firm performance has been plagued by a number of problems. The present study addressed three such problems. Relationships between diversification and multiple performance dimensions were reframed in the context of a time-ordered causal model. The results suggest that both diversification and performance are multidimensional constructs and that identification of appropriate criteria for performance assessment depends on the strategy pursued. The results also raise some intriguing questions regarding the conceptual definitions of diversification and performance constructs.
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