Product Diversification, Corporate Entrepreneurship, and Firm Performance: The Case of Vietnamese Firms

Abstract

This paper reexamines the relationship between the firm’s product diversification strategy and its performance. I propose a theoretical framework to indicate that the effect of diversification, as an act of corporate entrepreneurship, depends on whether responsiveness or synergy is emphasized. Empirical evidences from the provincial firm-level database in Vietnam show that diversification has positive and non-linear decreasing impact on firm-level profitability. The estimation results are consistent with different methodological treatments adopted: diversification index measured exogenously or endogenously in static model or dynamic model.