If you need an accessible version of this item please contact JSTOR User Support

Diversification Strategy, Profit Performance and the Entropy Measure

Krishna Palepu
Strategic Management Journal
Vol. 6, No. 3 (Jul. - Sep., 1985), pp. 239-255
Published by: Wiley
Stable URL: http://www.jstor.org/stable/2486185
Page Count: 17
  • Download PDF
  • Cite this Item

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

If you need an accessible version of this item please contact JSTOR User Support
Diversification Strategy, Profit Performance and the Entropy Measure
Preview not available

Abstract

Several industrial organization studies, using diversification index measures, examined corporate diversification and economic performance and failed to find any significant relationship between them. Rumelt and other strategy researchers used a semisubjective classification scheme and uncovered a systematic relationship between diversification strategies and performance. This study combines the strengths of the index approach, namely, simplicity, objectivity and replicability, with the essential richness of Rumelt's methodology. Using the Jacquemin-Berry entropy measure of diversification and the line-of-business data, this study finds that firms with predominantly related diversification show significantly better profit growth than firms with predominantly unrelated diversification.

Page Thumbnails

  • Thumbnail: Page 
[239]
    [239]
  • Thumbnail: Page 
240
    240
  • Thumbnail: Page 
241
    241
  • Thumbnail: Page 
242
    242
  • Thumbnail: Page 
243
    243
  • Thumbnail: Page 
244
    244
  • Thumbnail: Page 
245
    245
  • Thumbnail: Page 
246
    246
  • Thumbnail: Page 
247
    247
  • Thumbnail: Page 
248
    248
  • Thumbnail: Page 
249
    249
  • Thumbnail: Page 
250
    250
  • Thumbnail: Page 
251
    251
  • Thumbnail: Page 
252
    252
  • Thumbnail: Page 
253
    253
  • Thumbnail: Page 
254
    254
  • Thumbnail: Page 
255
    255