Diversification measures and their empirical application

In the search for the right strategy, companies are often faced with the fundamental choice of either being active in several heterogeneous individual businesses (diversification) or concentrating on their core business (focussing). The choice is based on considerations such as spreading the company's own risk and achieving synergies through diversification. If you want to measure the spread of these strategies in the corporate landscape, for example, you have to find suitable measures that can be used to assess whether a company is diversified or focussed, for example. To this end, indicators have already been developed in the past that attempt to depict these corporate structures.

Research question:

The aim of the Diplom thesis should therefore be to present the various measures and to work out the current state of the literature on diversification measures. In particular, the advantages and disadvantages of the various measures are to be discussed as well as their possible applications in empirical practice.

Examples for the introduction to the literature:

• Jacquemin, A.P./Berry, C.H. (1979), Entropy Measure of Diversification and Corpo-rate Growth. The Journal of Industrial Economics, 27 (4), pp. 359-369.
• Palepu, K. (1985), Diversification Strategy, Profit Performance and the Entropy Measure. Strategic Management Journal, 6 (3), pp. 239-255.
• Montgomery, C.A. (1982), The Measurement of Firm Diversification: Some New Empirical Evidence. Academy of Management Journal, 25 (2), pp. 299-307.
• Rumelt, R.P (1982), Diversification Strategy and Profitability. Strategic Management Journal, 3, pp. 359-369.
• Bryce, D./Winter, S. (2006), A General Inter-Industry Relatedness Index, Working Paper 06-31, Center for Economic Studies, U.S. Census Bureau.

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