Abstract
Japan's largest textile firms have adopted the strategy of diversification into new product markets, since they started facing industry maturity and macroeconomic turbulences. We find that the nature and magnitude of capabilities had decisive impacts on the direction of diversification. Our panel data analyses show that different diversification paths actually yielded contrasting performances. The outcomes also suggest that the effectiveness of specific diversification schemes was contingent on macroeconomic environments. Ultimately, however, only the commitment to technology, not marketing or finance, ensured long-term profitability. Copyright 2005, Oxford University Press.
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