The effect of logistics service providers’ diversification strategy on financial performance

ABSTRACT LSP’s service offerings and their financial strength are a core issue for supply chain partners and a decisive selection criterion for purchasing logistics services. Therefore, the purpose of the paper is to examine how logistics service providers’ (LSPs’) diversification strategies affect their financial performance during the stages of an economic cycle. Based on secondary data for the period from 2006 to 2016 this study carries out regression analyses and ANOVAs. The results show a U-shaped relationship between the LSPs’ level of diversification and their financial performance during all stages of an economic cycle. In detail, analyses provide evidence that a moderate level of diversification represents the inferior diversification strategy and that specialisation as well as high levels of diversification can be defined as superior diversification strategies. The study’s findings enable logistics managers and purchasers of logistics services to assess the performance of LSPs based on their individual diversification strategies and to be able to predict their performance development more precisely.