Srinivasan, S.¹, Thenmozhi, M.² and Vijayaraghavan, P.<sup>3

1</sup>Great Lakes Institute of Management, Chennai
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²Department of Management Studies, Indian Institute of Technology, Madras
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³Department of Management Studies, Indian Institute of Technology, Madras
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The purpose of this study is to develop a comprehensive model that examines the impact of corporate diversification, and its interaction effects with ownership structure, industry structure and firm size, to explain firm performance for three distinct phases of institutional development in an Indian context. The conceptual model developed through a review of literature is tested using a large sample of publicly traded companies in India, using the GLM Univatiate model for Post-liberalization, Transition and Pre-liberalization phases that span a period of fifteen years. Our findings show that diversification firm performance relationship varies as institutions develop. Although unrelated diversifiers achieved superior performance during the pre-liberalization phase, focused players performed better during the transition phase. In the Post-liberalization phase, diversification did not impact firm performance; superior firm performance was driven by the ability of firms to scale, be present in profitable industries and productively use their assets. Significant interaction effects were observed between diversification and, industry structure, ownership type and firm size, in explaining firm performance. Firms affiliated to large business groups continue to be highly diversified and under performed as institutions developed.

Keywords: corporate diversification, ownership structure, industry structure, firm size, firm performance, institutional transformation