Business relatedness and performance: A study of managerial perceptions

Understanding of business relatedness and performance effects is the foundation of any diversification decision, but we have limited knowledge of how Managers consider relatedness. This study identified relatedness classes and performance effects using perceptual survey data from top industrial executives. Four classes with significant variable differences were found: high, technology, customer, and low relatedness. Technology relatedness had a strong positive performance effect and high relatedness had a negative effect. The findings confirm that perceptions are multidimensional, but may include five key factors rather than the previously identified attribute categories of product-markets, resources, and value chains. Contributions to diversification literature are discussed. Copyright (c) 2006 John Wiley & Sons, Ltd.