Diversification dynamics of the Japanese industry

The diversification dynamics of R&D activities and business of Japanese industry was analyzed. The diversification of R&D activities developed in many industries during the 1980s but did not develop well during the early 1990s. There were some industries of which diversification in business developed just as it followed their R&D activities. The direction of diversification in R&D activities and business was also analyzed. It was found that the direction of diversification for high-tech and scale-intensive industries was downstream. Furthermore, the relationship between "diversification" and "performance" was analyzed using quantitative methods. The analysis showed that profitability dropped generally in industries which were highly diversified in unrelated fields. On the other hand, the progression of diversification in unrelated fields contributed to high sales growth. In addition, according to the results of the case study and quantitative analysis, it was found that diversification strategy that expanded into downstream activities with core technology or core component technology contributed to increased profitability. (C) 2001 Elsevier Science B.V. All rights reserved.