Causes and effects of multimarket activity from theory to empirical analysis

In this paper some of the results emerged in the empirical literature on diversification are put into perspective against the background of a simple integrative model of multiproduct firms. By letting diversification strategies depend on the simultaneous play of four factors (demand relationships and technological links between goods, collusion within a market and across markets), the latter provides an illustrative framework which is useful to discuss how effectively the issue of ambiguous findings has been tackled in applied works. In some cases scholars have devoted substantial effort in order to build tests which can successfully discriminate among the different views on the causes and effects of diversification, while in other circumstances empirical investigations have been conducted with much less care. Other then criticising some of the methods used in the past, the paper provides a number of suggestions that can help guiding future empirical work on corporate diversification. Copyright © 2004 John Wiley & Sons, Ltd.