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A Methodological Note on Diversity Measurement

Ernest H. Hall, Jr. and Caron H. St. John
Strategic Management Journal
Vol. 15, No. 2 (Feb., 1994), pp. 153-168
Published by: Wiley
Stable URL: http://www.jstor.org/stable/2486869
Page Count: 16
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A Methodological Note on Diversity Measurement
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Abstract

This research addresses the question, do categorical and continuous measures capture the same construct of diversity? Using analysis of variance, cluster analysis, and discriminant analysis, we investigated whether continuous measures (entropy and product count) differentiate between diversification categories, whether continuous measures converted to categories and subjectively assigned categories classified companies similarly, and whether continuous and categorical measures predicted similar diversity-performance relationships. We concluded that the techniques were associated but did not yield the same performance predictions. For researchers investigating diversity-performance relationships, choice of measurement technique will influence research results. Our research results suggest that attempts to combine categorical and continuous techniques as a way to overcome the limitations of both methods is not appropriate.

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