What has been observed as the relationship between diversification and firm performance?
A)Moderate levels of diversification provide the highest performance
B)Low levels of diversification provide the highest performance
C)High levels of diversification provide the highest performance
D)Moderate levels of diversification provide the lowest performance
E)None of these

Question

Quizplus · Accepted Answer

Numerous studies have found that moderate levels of diversification provide the highest performance. When firms diversify moderately, they can leverage their core competencies and spread their risks across related businesses, which can improve their overall performance. However, both low and high levels of diversification are associated with lower performance, as they can lead to either a lack of focus or excessive complexity and bureaucracy.

What Has Been Observed as the Relationship Between Diversification and Firm