Multidivisional Structure and Performance: The Contingency of Diversification Strategy

Abstract

This study examined the relationship between multidivisional (M-form) structure and performance. Theoretical work by Hill and Hoskisson suggested that the relationship between implementation of such a structure and performance should vary with diversification strategy. Findings based on longitudinal analysis of data from 62 firms in 20 industries indicate that M-form implementation increased the rate of return for unrelated diversifiers but decreased the rate of return of firms that adopted vertical integration. For related diversifiers, the change was not significant. Risk generally decreased after M-form restructuring, but the decrease was only significant for unrelated-diversified and vertically integrated firms.