Abstract
There are a large number of studies that have examined the diversification–performance and business group affiliation–performance relationships. However, very few have looked into the impact of macroeconomic environment on these relationships. In this paper, we examine under varied macroeconomic conditions, the impact of diversification, and business group affiliation on performance for firms. We argue that although diversification is influenced by macroeconomic parameters; the effect of business group affiliation is unchanged. Diversification results in superior performance during munificent macroeconomic environment while it has a negative impact on performance during scarce macroeconomic environment. In contrast, business group affiliation has positive impact on performance, irrespective of macroeconomic environment.
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