A Study of Product Diversification in Information Technology Industry

Diversified firms improve performance and competitiveness in the market by efficiently allocating resources among their various products or services, leading to economies of scope. In this study, we focus on product diversification in information technology industry. In detail, we take a sample of text data from 3,623 10-K filings of publicly traded companies in U.S. IT industry from 2000 to 2021, and investigate the development trend of product diversification by using text mining technique. Six key topics for IT firms’ products are identified: "Semiconductor and Electronic Product Manufacturing", "Telecommunications and Communication", "Television and Broadcasting Media", "Software and Internet Services", "IT based Healthcare and Life Sciences", and "Cloud Computing and Cybersecurity". These topics represent the main focus of IT companies in terms of product development and services offered to customers. IT product diversification demonstrates a "U" shaped trend between 2000 and 2021, as indicated by the Hirschman Herfindahl index and Concentric index. This pattern suggests fluctuations in IT product diversification over the specified period, with a notable turning point. This finding highlights the dynamic nature of diversification strategies in the IT Industry.