ABSTRACT
The relationship between corporate diversification and performance remains an important topic of research, as we have only a limited understanding of this linkage. This chapter begins with a brief review of the diversification literature, and examines important issues and the incorporation of the two dimensions, namely, firm competence development and institutional environment support. It explains in detail these two dimensions and their relevance. The chapter details a conceptual model and presents several propositions linking diversification and performance under different contexts. Core competence identification and development is an essential element in a model of the diversification and performance relationship. The model provides some preliminary basis for further theory development and empirical testing in the context of emerging economies. Several major aspects of the institutional environment in emerging economies, such as labor market, financial market, and product market, are substantially different from those in developed economies. The chapter concludes with some considerations regarding contributions, limitations, and the direction of future research.
