A study published in the Journal of Business Research found that firms that invest in innovation tend to have greater product diversification than firms that do not invest in innovation. The authors argue that innovation enables firms to develop new products and services that meet the needs of a wider range of customers, which in turn leads to greater diversification.
Another study published in the Strategic Management Journal found that firms that pursue innovation through strategic alliances tend to diversify their product offerings more than firms that pursue innovation through internal research and development. The authors suggest that strategic alliances enable firms to access new technologies and capabilities, which can facilitate the development of new products and services and ultimately lead to greater diversification.
Overall, while there may be some variation depending on the specific context and industry, the evidence suggests that innovation can be a driver of diversification for firms.
The relationship between diversification and innovation is not as straightforward as the relationship between innovation and diversification. While there are some studies that suggest a positive relationship between diversification and innovation, there are also studies that suggest a negative relationship or no relationship at all.
One study published in the Journal of Product Innovation Management found that diversification can stimulate innovation in some cases, but can also have a negative effect on innovation in others. The authors suggest that the relationship between diversification and innovation is mediated by a number of factors, including the nature of the diversification strategy and the industry context.
Another study published in the Academy of Management Journal found that the relationship between diversification and innovation is contingent on the level of resource commitment to diversification. The authors argue that firms that commit a moderate level of resources to diversification tend to be more innovative than firms that commit either a low or high level of resources to diversification.
Overall, the relationship between diversification and innovation is complex and context-dependent. While there may be some situations where diversification stimulates innovation, there are also situations where it may have a negative effect on innovation. The key takeaway is that firms should carefully consider the potential tradeoffs between diversification and innovation when developing their strategies.