A Concept of Conglomerate Diversification
- 1 December 1988
- journal article
- research article
- Published by SAGE Publications in Journal of Management
- Vol. 14 (4), 593-604
- https://doi.org/10.1177/014920638801400409
Abstract
This study develops and tests a new concept of conglomerate diversification that reflects afirm's sensitivity to the cyclical behavior and differential amplitude of economic sectors throughout the business cycle. The measure is shown to describe unique aspects of conglomerate diversification that are not captured by other commonly used SIC-based diversification measures or by the Rumelt categorization scheme. The measure is also used to evaluate the association between conglomerate diversification and the reduction of operating risk. The results indicate that conglomerates that diversify the effects of the business cycle through the proper selection of business segments are characterized by lower operating risk than otherfirms.Keywords
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