A New Playbook for Diversified Companies

A wave of corporate breakups has rippled through industry after industry over the past several years. This has happened in consumer goods, for instance, with Kraft Foods' spin-off of its North American grocery business; in materials, with Alcoa's split into separate aluminum and engineerin...

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Bibliographic Details
Published in:MIT Sloan management review 2019-02, Vol.60 (2), p.1
Main Authors: Pidun, Ulrich, Richter, Ansgar, Schommer, Monika, Karna, Amit
Format: Article
Language:English
Subjects:
Business models
Capital markets
Competition
Competitive advantage
Consumer goods
Diversification
Diversified companies
Meta-analysis
Spinoffs
Strategic management
Value creation
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Summary:A wave of corporate breakups has rippled through industry after industry over the past several years. This has happened in consumer goods, for instance, with Kraft Foods' spin-off of its North American grocery business; in materials, with Alcoa's split into separate aluminum and engineering businesses; in technology, with HP's separation of services and software from printers and PCs; in energy, with Danish industrial conglomerate A.P. Moller-Maersk's divestiture of its oil businesses; and in health care, with Siemens' spin-off of its medical technology division. The trend started in the 1980s in the United States and reached Europe in the late 1990s, but it has intensified in recent years, as more vocal investors have pressed for more focused business structures. For our meta-analysis, we searched 50 leading business, finance, economics, and management journals, as well as databases of doctoral studies, for primary studies on the diversification-company performance relationship. Applying several meta-analytic methods, we found that the negative effect of unrelated diversification on performance has lessened noticeably over time.
ISSN:1532-9194