Product diversity and performance: a macro study of 20 large swedish industrial corporations

Abstract

Relations between major product diversity (diversification) and the economic performance of 20 large Swedish industrial corporations during the time period 1971–1991 have been studied. Publicly available data concerning major product groups and corporate economic performance have been used. The quite limited diversification/concentration of the corporations’ product portfolios has mainly taken place through purchase/sale of product groups. Many movements have taken place during the period but the corporations have all stayed with their established basic products. Very little diversification was based on internal development. Not surprisingly, sales and employment growth (both extensive variables) and diversity are positively related. Employment growth has taken place mainly outside Sweden through market expansion rather than new product development. None of the intrinsic parameters studied (for example profit margin) distinguishes between highly diversified or diversifying corporations and other corporations. Neither do R&D expenditures or numbers of patent applications. There is a clear tendency for the ratio of value added to sales to decrease during the period studied. This may mean that the corporations have specialised their operations to selected parts of the value added chain, thus concentrating core competencies.