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Diversification and synergies: effects on profitability

Author

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  • Bianca, Magda

Abstract

This paper addresses the questions of the effects of diversification strategies on firms' profitability. Empirical analyses do not seem to confirm the hypothesis that diversification is the optimal response to the presence of synergies and hence generates higher profits. It is shown that this might be either the effect of distortions due to the omission of some other factors which affect the efficiency of firms, or the result of selection bias. Diversified firms, in fact, may be the less efficient firms, just able to survive due to the synergies they achieve diversifying.

Suggested Citation

  • Bianca, Magda, 1997. "Diversification and synergies: effects on profitability," LSE Research Online Documents on Economics 6763, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:6763
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    File URL: http://eprints.lse.ac.uk/6763/
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    More about this item

    Keywords

    Diversification; synergies; profitabiity; firms;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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