ABSTRACT
Economic performance is generally seen to be dependent on many factors. Diversification strategy may be regarded as one of these, but there are many other important factors that should also be taken into account. For example, the growth potential of the product market (industry) to which a firm belongs exerts a great influence on the performance of that firm. Also, the competitive structure (degree of market concentration, product differentiation, etc.) a firm faces is certainly another important factor. In order to examine the net effect that strategy exerts on performance, it is necessary to control for the effects that factors other than strategy have on performance. Such factors are:
1. The industry’s growth rate; 2. Degree of market concentration; 3. Level of research and development (technical product differentiation); 4. Advertising expenditures (product differentiation due to marketing); 5. Firm size.
