Symmetric Modeling of Diversification Strategy and Organizational Structure on Financial Performance: Evidence from China

Jianwei Cao,Cisheng Wu,Stephen Tetteh,Gendi Miao,Hui Guang

doi:10.3390/sym13020196

Jianwei Cao, Cisheng Wu + Show 3 more

Open Access

https://doi.org/10.3390/sym13020196

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Abstract

Diversification is a strategy adopted by many enterprises in the process of expansion. The success of the diversification of an enterprise mainly depends on the choice and implement of strategy; choosing an organizational structure that fits the type of diversification strategy used is fundamental to improving financial performance. Based on the empirical research method, this study establishes a symmetric model of diversification strategy and organizational structure on financial performance and selects data from 613 A-share-listed companies in China, from 2012 to 2016, to test the impacts of unrelated and related diversification strategies on financial performance, as well as the moderating effects of united company, holding company, and multidivisional structures on such relationships. The results show that there is asymmetry between the diversification strategy adopted and financial performance, and a related diversification strategy should be adopted as a priority; the symmetry of an unrelated diversification strategy and holding company structure on financial performance is partially confirmed, and other elements should be adopted, simultaneously, to improve this symmetry; a related diversification strategy and multidivisional structure on financial performance is symmetric. The above findings will provide references for the diversification strategy choice and the organizational structure design of enterprises.

Highlights

Enterprise management is a large area composed of different elements, and the symmetry of different elements generally exists in enterprise management
Numerous studies have shown that the symmetry of different elements of enterprise management plays a synergistic role in promoting enterprise development [1,2,3]
The results show that a holding company structure can more positively regulate the impact of using an unrelated diversification strategy on financial performance than united and multidivisional structures can, and a multidivisional structure can more positively regulate the impact of using a related diversification strategy on financial performance than united and holding company structures can

Summary

Introduction

Enterprise management is a large area composed of different elements, and the symmetry of different elements generally exists in enterprise management. Numerous studies have shown that the symmetry of different elements of enterprise management plays a synergistic role in promoting enterprise development [1,2,3]. This idea is applicable to the diversification strategies of enterprises. After the diversification strategy is selected, the successful implementation of the diversification strategy requires the synergistic effect of different management elements, among which choosing an organizational structure that is symmetric to the type of diversification strategy used is key to ensuring the realization of financial performance objectives [5,6]. Symmetry between the diversification strategy adopted and the organizational structure can promote financial performance

Results

Discussion

Conclusion