This article focuses on the subject of diversification and firm performance. Specifically, it discusses the resource-based view of a firm and also provides an exposition of environment and strategy. It concentrates on core-competency in the framework of resource-based view of firms and also discusses institutional and external environments and implications for management strategy.

The relationship between diversification and performance has long been a central topic of interest in strategic management. In spite of the persistent efforts from researchers over the years, firm and clear-cut conclusions remain evasive. Two rationales stand out in the focus of the diversification and performance relationship. The first and probably the most notable relates to resource building and utilization. This view has played an important role in explaining firm diversification and has gained greater prominence as the field focuses its attention to internal resources and capabilities. The second rationale is the agency theory argument. According to this argument, with separation of ownership and control, divergence of interests between top managers and owners and the existence of information asymmetry would create necessary conditions for top managers to pursue unrelated diversification strategies that depress firm performance.

Diversification, firm performance,Specifically,exposition,environment,strategy,core-competency,framework,external environments , implications,management strategy, strategic management,persistent efforts,researchers, resource building,utilization,firm diversification,prominence,ownership and control,information asymmetry.