Research regarding the relationship between product diversification and firm performance indicates that:
A)Putting your eggs in similar baskets," has emerged as a balanced way to both reduce risk and leverage synergy.
B)Performance may decrease as firms change from product-related to -unrelated.
C) The linkage between diversification and performance is inverted U shaped.
D) All of the above.

Question

Quizplus · Accepted Answer

A) Product diversification can reduce risk by not relying on a single product or market, but it can also leverage synergy by sharing resources and capabilities across multiple products or markets. 
B) Studies have found mixed results regarding the impact of changing from product-related to unrelated diversification. Some suggest a decrease in performance due to the management complexity and less focused strategy, while others have found no significant impact. 
C) The inverted U-shaped relationship between diversification and performance suggests that there is an optimal level of diversification for each firm, beyond which performance may decline. This is because too much diversification can lead to loss of focus and increased management complexity.

Research Regarding the Relationship Between Product Diversification and Firm Performance