China’s business groups after three decades of economic reform: Diversified conglomerates or focused industrial groups?

Abstract

The 1990s witnessed poor performances among many East Asian business groups. This was attributed in part to their lack of core business focus and problems of corporate governance that accompanied their diversified business group structures. The question of whether firms should specialize and focus on core competencies, or whether they should follow diversification strategies, has therefore gained widespread interest in the context of East Asian business in recent times. There are few if any studies to date, however, that look at the overall extent of diversification within China’s big business groups. This is surprising given the rapid speed with which such groups have emerged during China’s three decades of economic reform. The extent of diversification among China’s big business groups is therefore very interesting, for reasons related to both economic and business theory as well as industrial policy.