Diversification patterns in the growth of firms: Evidence from Italian manufacturing

We present empirical evidence on diversification patterns in Italian manufacturing firms and detect a robust relationship between firm size and diversification levels, with an elasticity of diversification that does not depend on firm size and is well below unity. Diversification does not lead to decreased corporate risk when measured in terms of the growth performance of Italian manufacturing firms. The findings support the Penrosian theory of diversification in the process of firm growth. In addition, we also speculate about the role of technology in the size-diversification nexus.