Buy low sell high: corporate strategy and product portfolio change

Firms that add both depth and breadth to their product portfolios have been shown to improve their long-term performance. However, complementary research suggests that increasing both depth and breadth in tandem requires the use of fundamentally different skills, which creates a tension. One way in which firms can get around this problem is by using mixed modes, specifically acquisition and divestitures, to add both breadth and depth to their product portfolios. We test these ideas on a dataset of 146 firms operating in the pharmaceutical manufacturing industry from 1999 to 2009 and find interesting results. While completing a greater number of acquisitions does not significantly change concentration of product portfolios, completing a greater number of divestitures does increase breadth of product portfolios.