Document Type : Original Research


Faculty of Business and Management, Muscat University, Muscat, Oman


This paper investigates the impact of diversification strategy on firm performance. The paper looks into three dimensions of diversification strategy in terms of staff, product and geographical presence, using return on asset (ROA) and return on equity (ROE) to proxy for financial performance. Using the fixed effects regression estimation method to analyze the data of 30 Iranian insurance companies in the period from 2012-2021, the article finds a significant positive impact of diversification in terms of staff education on ROA, while the relationships between staff diversification in terms of gender and experience with ROA are significantly negative. No significant relationship is found between diversification in terms of geographical presence, insurance policy, and premium with ROA. When ROE measures financial performance, the research reports significantly positive effects of diversification on ROE in terms of education and insurance policy. In contrast, the relationships between diversification in terms of gender and premium with ROE are found to be significantly negative. Meanwhile, the effects of diversification on ROE in terms of geographical presence and experience are insignificant. The paper contributes to the literature on diversification strategy by developing specific models to measure staff, geographic and product diversification strategies in the insurance industry. It also adds to the literature on the diversification-performance nexus by bringing fresh insight into the multiple dimensions of diversification strategies and their impacts on firms' profitability.


Main Subjects


©2023 The Author(s). This is an open access article distributed under the terms of the Creative Commons Attribution (CC BY 4.0), which permits unrestricted use, distribution, and reproduction in any medium, as long as the original authors and source are cited. No permission is required from the authors or the publishers.

Ai, J., Bajtelsmit, V., & Wang, T. (2018). The Combined Effect of Enterprise Risk Management and Diversification on Property and Casualty Insurer Performance. The Journal of Risk and Insurance, 85(2), 513–543.
Alfar, A. J., Abuatwan, N., Elheddad, M., & Qaki, M. (2023). The Internal Determinants of Gender Diversity and Its Non-Linear Impact on Firms' Performance: Evidence from the Listed Companies in Palestine Exchange. Journal of Risk and Financial Management, 16(1), 28.
Alzoubi, T. (2020). Insurance Diversification and Total Risk. European Journal of Business and Management, 12(15), 65-67.
Annual Industry Report (2021). Retrieved from Central Insurance of Iran
Ansoff, H. I. (1957). Strategies for diversification. Harvard Business Review, 35, 113– 124.
Armstrong, C., Flood, P. C., Guthrie, J. P., Liu, W., MacCurtain, S., & Mkamwa, T. (2010). The impact of diversity and equality management on firm performance: Beyond high performance work systems. Human Resource Management, 49(6), 977-998.
Arte, P., & Larimo, J. (2022). Moderating influence of product diversification on the international diversification-performance relationship: A meta-analysis. Journal of Business Research, 139, 1408-1423.
Asghari Zakaria, R., Fathi, M., & Hasan Panah, D. (2006). Sequential Path Analysis of Yield Components in Potato. Potato Research, 49(4), 273–279.
Becerra, M. (2009). Theory of the firm for strategic management: economic value analysis. Cambridge University Press.
Berger, A. N., Hasan, I., & Zhou, M. (2010). The effects of focus versus diversification on bank performance: Evidence from Chinese banks. Journal of Banking & Finance, 34(7), 1417–1435.
Bettis, R. A. (1981). Performance differences in related and unrelated diversified firms. Strategic Management Journal, 2(4), 379-393.
Brezina, I., Pekár, J., Čičková, Z., & Reiff, M. (2016). Herfindahl–Hirschman index level of concentration values modification and analysis of their change. Central European Journal of Operations Research, 24, 49-72.
Bruna, M. G., Đặng, R., Ammari, A., & Houanti, L. (2021). The effect of board gender diversity on corporate social performance: An instrumental variable quantile regression approach. Finance Research Letters, 40, 101734.
Capar, N., & Kotabe, M. (2003). The relationship between international diversification and performance in service firms. Journal of International Business Studies, 34, 345-355.
Cennamo, L., & Gardner, D. (2008). Generational differences in work values, outcomes and person-organization values fit. Journal of Managerial Psychology, 23, 891–906.
Che, X., & Liebenberg, A. P. (2017). Effects of business diversification on asset risk taking: Evidence from the US property-liability insurance industry. Journal of Banking & Finance, 77, 122-136.
Chikoto, G. L.; Ling, Q.; and Neely, D. G., The Adoption and Use of the Hirschman–Herfindahl Index in Nonprofit Research: Does Revenue Diversification Measurement Matter? (2016). Accounting Faculty Research and Publications. 91.
Clark, J. A., & Speaker, P. J. (1994). Economies of scale and scope in banking: evidence from a generalized translog cost function. Quarterly Journal of Business and Economics, 33(2), 3-25.
Cole, C. & Karl, J. B. (2016). The effect of product diversification strategies on the performance of health insurance conglomerates, Applied Economics, 48, 3, 190-202.
Dalkani, M., Hassani, A., & Darvishzadeh, R. (2012). Determination of the genetic variation in Ajowan (Carum Copticum L.) populations using multivariate statistical techniques. Ciência Agronômica, 43(4), 698–705.
Datta, D. K., Rajagopalan, N., & Rasheed, A. M. (1991). Diversification and performance: Critical review and future directions. Journal of Management Studies, 28(5), 529-558
Dauda, S. (2018). Hospital and Health Insurance Markets Concentration and Inpatient Hospital Transaction Prices in the U.S. Health Care Market. Health Services Research, 53(2), 1203–1226.
Djolov, G. (2013). The Herfindahl-Hirschman index as a decision guide to business concentration: A statistical exploration. Journal of Economic and Social Measurement, 38(3), 201-227.
Dong, W., & Wong, F. S. (2000, January). Portfolio theory for earthquake insurance risk assessment. In Proceedings of the 12th World Conference on Earthquake Engineering, Paper (No. 0163).
Doukas, J., & Travlos, N. G. (1988). The effect of corporate multinationalism on shareholders' wealth: Evidence from international acquisitions. The Journal of Finance, 43(5), 1161-1175.
Duijm, P., & van Beveren, I. (2020). Product diversification as a performance boosting strategy? Drivers and impact of diversification strategies in the property-liability insurance industry (No. 677). Netherlands Central Bank, Research Department.
Ekkayokkaya, M., & Paudyal, K. (2015). A trade-off in corporate diversification. Journal of Empirical Finance, 34, 275-292.
Elango, B., Ma, Y.-L., & Pope, N. (2008). An Investigation Into the Diversification-Performance Relationship in the U.S. Property-Liability Insurance Industry. The Journal of Risk and Insurance, 75(3), 567–591.
Elsas, R., Hackethal, A., & Holzhäuser, M. (2010). The anatomy of bank diversification. Journal of Banking & Finance, 34(6), 1274-1287.
Estes, K. (2014). Diversification and community bank performance during a financial crisis. International Journal of Finance & Banking Studies (2147-4486), 3(4), 01-40.
Foong, S.Y., & Idris, R. (2012). Leverage, product diversity and performance of general insurers in Malaysia. The Journal of Risk Finance, 13(4), 347–361.
Gort, M. (1962) Diversification and Integration in America. Princeton University Press, Princeton, New Jersey.
Grant, R. M., Jammine, A. P., & Thomas, H. (1988). Diversity, Diversification, and Profitability among British Manufacturing Companies, 1972-84. Academy of Management Journal, 31(4), 771–801.
Gyan, K. A., & Jan‐Bezemer, P. (2022). Related diversification, firm-level resources, and firm performance in the context of Australian extractive industry. Journal of Corporate Accounting & Finance, 33(2), 142-153.
Haghighi, M., Karami, M., Hamidi Kolaei, A., & Maleki, M. M. (2016). Investigation of the relationship between cultural values and Iranian consumers impulse buying behavior. Journal of Business Management, 8(2), 301-316.
Hanson, C., Herring, B., & Trish, E. (2019). Do health insurance and hospital market concentration influence hospital patients' experience of care? Health Services Research, 54(4), 805–815.
Hauschild, S., & Knyphausen-Aufseß, D. zu. (2013). The resource-based view of diversification success: conceptual issues, methodological flaws, and future directions. Review of Managerial Science, 7(3), 327–363.
Hill, C. W. L. and Hoskisson, R. E. (1987). Strategy and structure in the multiproduct firm. Academy of Management Review, 12(2), 331-41.
Hitt, M. A., & Ireland, R. D. (1986). Relationships among corporate level distinctive competencies, diversification strategy, corporate structure and performance. Journal of Management Studies, 23(4), 401-416.
Hofhuis, J., Van der Rijt, P. G., & Vlug, M. (2016). Diversity climate enhances work outcomes through trust and openness in workgroup communication. SpringerPlus, 5(1), 1–14.
Hyland, D., Diltz, D. (2002). Why Firms Diversify: An Empirical Examination, Finance Management, 31, 51-81.
Ibhagui, O. W., & Olokoyo, F. O. (2018). Leverage and firm performance: New evidence on the role of firm size. The North American Journal of Economics and Finance, 45, 57–82.
Iqbal, A., Hameed, I., & Qadeer, M. (2012). Impact of Diversification on Firms' Performance. American Journal of Scientific Research, (80), 42-53.
Kaže, V. (2010). The impact of customer values on purchasing behaviour: a case of Latvian Insurance Market. Kaunas University: Economics and Management, 15, 605- 611.
Kim, K., Hwang, J., Jung, S., & Kim, E. (2019). Which technology diversification index should be selected?: Insights for diversification perspectives. Cogent Business & Management, 6(1), 1-18.
Krivokapic, A., Njegomir, V. & Stojic, D. (2017). Effects of corporate diversification on firm performance: evidence from the Serbian insurance industry, Economic Research-Ekonomska Istraživanja, 30:1, 1224-1236.
Kroll, C. N., & Song, P. (2013). Impact of multicollinearity on small sample hydrologic regression models. Water Resources Research, 49(6), 3756-3769.
La Rocca, M., & Staglianò, R. (2012). Unrelated diversification and firm performance: 1980-2007 evidence from Italy. Australasian Accounting, Business and Finance Journal, 6(1), 75-82.
Le, Han. (2019). Literature Review on Diversification Strategy, Enterprise Core Competence and Enterprise Performance. American Journal of Industrial and Business Management. 09. 91-108.
Lee, C. Y. (2020). The Impact of Product Diversification on Risk-taking Behavior in Property and Liability Insurance Firms. Journal of Applied Finance and Banking, 10(3), 177-197.
Lee, C.-Y. (2017), "Product diversification, business structure, and firm performance in Taiwanese property and liability insurance sector. Journal of Risk Finance. Vol. 18 No. 5, pp. 486-499.
Liebenberg, A. P., & Sommer, D. W. (2008). Effects of Corporate Diversification: Evidence from the Property-Liability Insurance Industry. The Journal of Risk and Insurance, 75(4), 893–919.
Lin, C., & Chang, C. C. (2015). The effect of technological diversification on organizational performance: An empirical study of S&P 500 manufacturing firms. Technological Forecasting and Social Change, 90, 575-586.
Lin, Y., Shi, X., & Zheng, Z. (2021). Diversification strategy and bank market power: does foreign ownership matter? Applied Economics Letters, 28(4), 269–273.
Meador, J. W., & Ryan Jr, H. E. (1997). Product Focus versus Diversification: Estimates of X-Efficiency for the US Life Insurance Industry (No. 97-16). Wharton School Center for Financial Institutions, University of Pennsylvania.
Meador, J. W., Ryan Jr, H. E., & Schellhorn, C. D. (2000). Product focus versus diversification: Estimates of X-efficiency for the US life insurance industry. Performance of financial institutions: efficiency, innovation, regulation, 175-198.
Ng, M. K., Ng, K. K., Song, S., Emara, A. K., Ngo, J., Patel, A., Shah, N., Mossialos, E., Salas-Vega, S., Mont, M., & Piuzzi, N. (2020). U.S. Healthcare Insurance Market Concentration from 2001 to 2016: Increased Growth in Direct Written Premiums and Overall Decreased Market Consolidation. Cureus12(3), e7491.
Nigam, N. K., & Gupta, C. P. (2023). Negative related diversification, positive related diversification and firm's performance: Measurement and application. Global Business Review, 24(1), 48-67.
Nnadi, C. S. O., & Chinedu, U. A. (2019). Effect of Diversity Management Strategies on Employee Retention among Staff of Nigeria Deposit Insurance Corporation. International Journal of Academic Research in Business and Social Sciences, 9(7), 999-1019.
Omosa, H. M., Muya, J., Omari, S., & Momanyi, C. (2022). Role of product diversification strategy on performance of selected tea factories in Kenya. International Academic Journal of Innovation, Leadership and Entrepreneurship, 2(2), 279-296.
Ortynski, K. (2019). Product Diversification and Firm Performance In Polish Nonlife Insurance Sector. Electronic Journal of Polish Agricultural Universities, 22(3).
Pandya, A. M., & Rao, N. V. (1998). Diversification and firm performance: An empirical evaluation. Journal of financial and strategic decisions, 11(2), 67-81.
Park, K., & Jang, S. S. (2013). Effects of within-industry diversification and related diversification strategies on firm performance. International Journal of Hospitality Management, 34, 51-60.
Peng, J.L., Chen, L.R., Wang, J.L. et al. Diversification Versus Strategic Focus: Evidence from Insurance Intermediaries in Taiwan. Geneva Pap Risk Insur Issues Pract. 42, 530–555 (2017).
Penrose, E.T. (1959) The Theory of the Growth of the Firm. New York.
Persson, F., & Lindgren, J. (2005). Diversification and Performance: The Nordic Media Market (Dissertation).
Phung, D. N., & Mishra, A. V. (2016). Corporation Diversification and Firm Performance: Evidence from Vietnamese Listed Firms: Corporation Diversification and Firm Performance. Australian Economic Papers, 55(4), 386–408.
Ravichandran, T., Liu, Y., Han, S., & Hasan, I. (2009). Diversification and Firm Performance: Exploring the Moderating Effects of Information Technology Spending. Journal of Management Information Systems, 25(4), 205–240.
Rogers, M. (2001). The Effect of Diversification on Firm Performance. Melbourne Institute of Applied Economic and Social Research working paper, 2001n02.
Rogers, M. (2004). Networks, Firm Size and Innovation. Small Business. Economics. 22, 141–153.
Rubio-Varas, M., & Muñoz-Delgado, B. (2019). The Energy Mix Concentration Index (EMCI): Methodological considerations for implementation. MethodsX, 6, 1228–1237.
Rudden, J. (2023, August 28). Estimated share of motor insurance premiums written online and offline in the United Kingdom (UK) from 2018 to 2024. Retrieved from Statista:
Santarelli, E., & Tran, H. T. (2013). Diversification strategies and firm performance: A sample selection approach, Quaderni - Working Paper DSE, No. 896.
Santarelli, E., & Tran, H. T. (2016). Diversification strategies and firm performance in Vietnam: Evidence from parametric and semi‐parametric approaches. Economics of Transition, 24(1), 31-68.
Sarmento, M., Nunes, A. (2015). The evolution of the sectoral concentration in Portugal between 1995 and 2006: the Herfindahl-Hirschman index perspective. Tourism & Management Studies, 11(2), 146-158.
Saxena, A. (2014). Workforce Diversity: A Key to Improve Productivity. Procedia Economics and Finance, Volume 11, Pages 76-85.
Seifzadeh, P. (2017). Corporate controls, geographic dispersion, and their effect on corporate financial performance in related diversified corporations. Journal of Strategy and Management. 10(1), 1-35.
Servaes, H. (1996). The value of diversification during the conglomerate merger wave. The Journal of Finance, 51(4), 1201-1225.
Shi, B., Baranoff, E. G., & Sager, T. W. (2016). Product Diversification in Health Insurance with Comprehensive Coverage Benefits US Health Insurers. Journal of International & Interdisciplinary Business Research, 3(1), 14-28.
Shim, J. (2011). Mergers and Acquisitions, Diversification and Performance in the U.S. Property-Liability Insurance Industry. Journal of Financial Services Research, 39(3), 119–144.
Smith M.L., Kane S.A. (1994). The Law of Large Numbers and the Strength of Insurance. Insurance, Risk Management, and Public Policy. Huebner International Series on Risk, Insurance and Economic Security. 18(1), 1-27.
Stetz, P. and Scifres, E. (2018). Curvilinear Relationship between Diversification and Performance: A Replication and Extension of Previous Research. Faculty Publications. 19.
Su, W., & Tsang, E. W. K. (2015). Product Diversification And Financial Performance: The Moderating Role Of Secondary Stakeholders. Academy of Management Journal, 58(4), 1128–1148.
Subramaniam, V., & Wasiuzzaman, S. (2019). Geographical diversification, firm size, and profitability in Malaysia: A quantile regression approach. Heliyon, 5(10).
Triguero-Sanchez, R., Pena-Vinces, J., & Guillen, J. (2018). How to improve firm performance through employee diversity and organizational culture. Revista Brasileira de Gestao de Negocios, 20, 378-400.
Wang, J., Jeng, V. & Peng, J. (2007). The Impact of Corporate Governance Structure on the Efficiency Performance of Insurance Companies in Taiwan. The Geneva Papers on Risk and Insurance: Issues and Practices. 32, 264–282.
Wooldridge, J. (2010). Econometric Analysis of Cross Section and Panel Data. Cambridge, Massachusetts; London, England: The MIT Press.
Yildirim, C., & Efthyvoulou, G. (2018). Bank value and geographic diversification: regional vs global. Journal of Financial Stability, 36, 225-245.