Degree Of Product Diversification Research Articles

Agri‐ food Exports from Central‐ and Eastern‐European Member States of the European Union are Catching Up

SummaryCountries from Central and Eastern Europe (CEE) that joined the European Union (EU) since May 2004 have recorded rapid increases in their agri‐food exports. While this increase in participation in international trade has been global, the CEE‐11 countries have mainly targeted the EU market. Poland, Hungary, Czechia and Romania are among those countries that have increased their agri‐food exports the most. We find that many CEE‐11 countries, especially Czechia and the Slovak Republic, Estonia, Hungary and Poland, have achieved their export expansion along the intensive margin, i.e. the expansion of average exports per existing product with existing trade partners. The extensive margin, i.e. an increase in the number of exported products with existing and new trade partners, along with a degree of product diversification in established markets was important for Lithuania, Romania and Estonia. We also note that in order to further benefit from an increased participation in trade, CEE countries need to switch from predominantly exporting traditional products towards penetrating more innovative product segments, along with new varieties of established products; and thus base their export expansion to a larger extent on the extensive margin.

The effect of import competition on product diversification revisited

AbstractResearch summaryBowen and Wiersema, Strategic Management Journal, 2005, 26, 1153–1171, provide empirical evidence that U.S. firms decreased their degree of product diversification as a response to the increase in import competition in their 1985–1994 study. After replicating their study, we expand it with alternative econometric analyses and a larger data set. While we obtain nearly identical results using their Tobit regressions, the negative impact of imports on diversification disappears when we control for firm fixed‐effects. Furthermore, using tariffs as instrument for imports, we find that import competition may even lead domestic firms to increase their diversification. The negative relationship between import penetration and diversification seems to result from the endogeneity of imports, which grew more in industries dominated by firms with low diversification at the turn of the previous century.Managerial summaryPrevious research by Bowen and Wiersema, Strategic Management Journal, 2005, 26, 1153–1171 showed that when import penetration grew in the 1985–1994 period in the U.S., firms seemed to reduce their diversification across industries and refocus on their core business, presumably to increase their competitiveness against foreign imports. We replicate their study and reach the opposite conclusion regarding firms' response to greater pressure from imports, using enhanced statistical methods and also a larger database. We conclude that diversified firms are more likely to switch their focus to other industries when import competition increases in their main line of business, and this greater flexibility of switching industries seems to give them an advantage over specialized firms.

R&D drivers and age: Are young firms different?

This study examines the relationship between R&D drivers and firm's age, taking into account the autoregressive nature of innovation.Using a large longitudinal dataset comprising Spanish manufacturing firms over the period 1990–2008, we find that previous R&D experience is a fundamental determinant for mature and young firms, albeit to a smaller extent in the case of younger firms, suggesting that their innovation behaviour is less persistent and more erratic.Moreover, our results suggest that firm and market characteristics play a distinct role in boosting the innovation activity of firms of different ages. In particular, while market concentration and the degree of product diversification are found to be important in fostering R&D activities in the subsample of mature firms only, young firms’ spending on R&D appears to be more sensitive to demand-pull variables.These results have been obtained using a recently proposed dynamic type-2 tobit estimator, which accounts for individual effects and efficiently handles the initial conditions problem.

The Effects of Cross‐border and Cross‐industry Mergers and Acquisitions on Home‐region and Global Multinational Enterprises

We examine the effects of international and product diversification through mergers and acquisitions (M&As) on the firm's risk–return profile. We identify the rewards from different types of M&As and investigate whether becoming a global firm is a value‐enhancing strategy. Drawing on the theoretical work of Vachani (Journal of International Business Studies, 22 (1991), pp. 307−222) and on Rugman and Verbeke's (Journal of International Business Studies, 35 (2004), pp. 3−18) metrics, we classify firms according to their degree of international and product diversification. To account for the endogeneity of M&As, we develop a panel vector autoregression. We find that global and host‐region multinational enterprises benefit from cross‐border M&As that reinforce their geographical footprint. Cross‐industry M&As enhance the risk–return profile of home‐region firms. This effect depends on the degree of product diversification. Hence there is no value‐enhancing M&A strategy for home‐region and bi‐regional firms to become ‘truly global’.

Mergers and Acquisitions: Driving the Growth of MNEs

This paper examines the effects of internationalization (international diversification) and diversification across industries (product diversification) through mergers and acquisitions (M&As) on the firm’s risk-return profile. Drawing on the theoretical work of Vachani (1991) and Rugman and Verbeke’s (2004) metrics, we classify firms according to their degree of product diversification and global reach. These two dimensions at the firm-level are moderators for the performance–expansion relationship. To account for the endogeneity of market entry decisions, we develop a panel vector autoregression. We show that global and host-triad multinational enterprises (MNEs) benefit from cross-border M&As, which reinforces their geographic footprint. In contrast to all other types of firms, home-triad firms exhibit higher firm value without a change in risk when conducting cross-industry M&As. This effect, however, depends on the degree of product diversification. For home-triad firms with a small product range engaging in cross- industry transactions is a value-enhancing growth strategy.

Bank risk and non-interest income activities in the Indonesian banking industry

The recent trend of product diversification in the Indonesian banking industry underscores the importance of non-interest income activities. This study examines the relationship between product diversification and bank risk over the period of 2002–2008. Our analysis shows clear evidence that the effect of product diversification on bank risk depends highly on the bank's asset size. Specifically, the degree of product diversification is negatively associated with bank risk for small-sized banks. Conversely, the degree of product diversification is positively related to bank risk for large-sized banks. This finding suggests that deregulation encouraging banks to become more involved in non-traditional activities may have an adverse effect on the overall banking system where large-sized banks are playing a significant role in Indonesia.

The Determinants of YIC's R&D Activity

This paper examines the determinants of young innovative companies’ (YICs) R&D activities taking into account the autoregressive nature of innovation. Using a large longitudinal dataset comprising Spanish manufacturing firms over the period 1990-2008, we find that previous R&D experience is a fundamental determinant for mature and young firms, albeit to a smaller extent in the case of the YICs, suggesting that their innovation behavior is less persistent and more erratic. Moreover, our results suggest that firm and market characteristics play a distinct role in boosting the innovation activity of firms of different age. In particular, while market concentration and the degree of product diversification are found to be important in boosting R&D activities in the sub-sample of mature firms only, YICs’ spending on R&D appears to be more sensitive to demand-pull variables, suggesting the presence of credit constraints. These results have been obtained using a recently proposed dynamic type-2 tobit estimator, which accounts for individual effects and efficiently handles the initial conditions problem.

Product Diversification and Profitability in German Manufacturing Firms

Summary We use unique rich data for German manufacturing enterprises to investigate the product diversification - firm performance relationship.We find that an increase in the degree of product diversification has a negative impact on profitability when observed and unobserved firm characteristics are controlled for. The effects are statistically significant and large from an economic point of view. This helps to understand the fact that nearly 40 percent of all enterprises with at least 20 employees are single-product firms according to a detailed classification of products, and that multi-product enterprises with a large number of goods are a rare species.

Debt-maturity, corporate diversification and relatedness

The aim of this study is to analyse the financing choices of multibusiness firms, in terms of debt-maturity. The results suggest that the degree of product diversification and the direction of diversification (related or unrelated) translate into different corporate financial behaviours. In particular, diversification related or unrelated had opposite effects on debt-maturity; the former strategy has a negative effect whereas the latter has a positive influence on debt-maturity.

R&D Drivers in Young Innovative Companies

This paper examines the determinants of young innovative companies' (YICs) R&D activities taking into account the autoregressive nature of innovation. Using a large longitudinal dataset comprising Spanish manufacturing firms over the period 1990-2008, we find that previous R&D experience is a fundamental determinant for mature and young firms, albeit to a smaller extent in the case of the YICs, suggesting that their innovation behaviour is less persistent and more erratic. Moreover, our results suggest that firm and market characteristics play a distinct role in boosting the innovation activity of firms of different age. In particular, while market concentration and the degree of product diversification are found to be important in fostering R&D activities in the sub-sample of mature firms only, YICs' spending on R&D appears to be more sensitive to demand-pull variables, suggesting the presence of credit constraints. These results have been obtained using a recently proposed dynamic type-2 tobit estimator, which accounts for individual effects and efficiently handles the initial conditions problem.

When Do International Operations Lead to Improved Performance? An Analysis of Property‐Liability Insurers

AbstractIn recent decades, insurers have been increasing their exposure to international markets. This article seeks to investigate the relationship between property‐liability insurers' international operations and their risk‐adjusted returns using cross‐section and time‐series data for the years 1992 through 2000. Our findings indicate that the relationship between international operations and performance is contingent upon the degree of product diversification. Insurance companies with focused operations in terms of product lines achieve higher risk‐adjusted performance as they increase their exposures to international markets. However, insurers who are highly diversified across product lines face declining returns with greater exposure to international markets.

Influence of industry R&D intensity on corporate product diversification: interaction effect of free cash flow

This study analyzes the effect of industry R&D intensity on the degree of product diversification and examines the interaction effect of free cash flow on the previous relationship at the current time in large US firms. Using the S&P 500 sample, we found support for the hypothesis that industry R&D intensity has a positive impact on the degree of product diversification. On the contrary, this study has found partial support for the hypothesis that free cash flow positively affects the previous relationship. Copyright 2006, Oxford University Press.

Uncertain Outcomes of Foreign Investment: Determinants of the Dispersion of Profits After Large Acquisitions

When U.S. firms make large international acquisitions, the unpredicted component of their profits over the next five years increases with the relative size of the acquired firm, degree of product diversification, and reliance on R&D assets. The unpredicted component declines with the acquirer's size, experience, and previous profits. Transitory and longer-run unpredicted components are distinguished.

ORGANIZATION DESIGN AND THE LIFE‐CYCLES OF PRODUCTS [1

ABSTRACTThis paper presents a model which elaborates the relationship between organization design and the product life‐cycle. Consideration is given to the structural implications of corporations which have multiple products at differing phases in their life‐cycles. This involves a theoretical synthesis of work on P.L.C. with that on degree of product diversification.