The study of diversification and firm performance lies at the heart of the strategy literature (Dess, Gupta, Hennart, & Hill, 1995). Nevertheless, in spite of all the efforts of researchers to untangle the diversificationperformance relationship milieu, there is still much confusion surrounding this vital issue. One potential source of confusion centers on the type of diversification being purs...

Opinions expressed herein do not necessarily concur with the Federal Reserve Board or any other employees of the Federal R.eserve System. The authors are also grateful co Stephen Brown for providing some of the international stock market data. Some of the UK stock market data used in the analysis herein were extracted from the London Share Price Database, which is a copyright work of the L,ondo...