Diversification Decisions Research Articles

Crop diversification and the effect of weather shocks on Italian farmers' income and income risk

AbstractAgriculture is vulnerable to extreme weather shocks. Climate change increases both the frequency and the intensity of such shocks. To safeguard farmers' income and food production, climate adaptation measures are required. This article aims to examine the effectiveness of crop diversification as an adaptation measure, using Italy as a case study. We apply a control function approach to a panel dataset of 20,790 Italian farms, which considers (i) the crop diversification decision and (ii) the influence of crop diversification on farmers' levels of crop income and income risk. We find that, while specialisation can increase income, crop diversification reduces income risk most effectively when growing four different crops. At this level of diversification, income risk is approximately 29% lower as opposed to monoculture farming. Although the Common Agricultural Policy's greening payments for crop diversification make sense from an ecological and risk‐reducing point of view, we find that they are potentially insufficient to cover the loss of expected crop income from diversification. While crop diversification reduces income risk in general, we find no specific benefit in terms of weather shock‐induced risks. This may be because a price increase following a weather shock buffers its adverse effect. However, identifying the reasons requires further research.

Crop Diversification and its Determinants among Vegetable Farmers in Kotagala, Nuwara Eliya District in Sri Lanka

A sound understanding of the demographic and farming characteristics of smallholder farmers and how they stimulate their crop diversification decisions would help policymakers make appropriate measures for encouraging crop diversification. The objectives of the study are to assess the degree of crop diversification and examine in what ways the demographic and farming characteristics of smallholder vegetable farmers impact their crop diversification at Kotagala area in the Nuwara – Eliya district of Sri Lanka. Cross-sectional data were obtained from 86 randomly selected farmers who were cultivating nine vegetable crops in the Kotagala division using the structured questionnaires during the period from October to November 2019. The degree of crop diversification among vegetable farmers was measured using the Herfindahl index, which has a mean value of 0.36. It shows that there is a low degree of crop diversification and the practices in multiple crop cultivation among the farmers is very low. Results of the frequency analysis revealed that 60.5 percent of the farmers are diversifiers, while 39.5 percent of them are non - diversifiers. Further, the tobit regression model was used to examine how demographic and farming characteristics of smallholder farmers influence crop diversification and its results indicated that age squared and education negatively influenced on crop diversification at a 10 percent significance level. On the contrary, crop diversification is positively influenced by the age and size of cultivated land at a 5 percent significance level. The findings of the study will assist the decision makers in developing the best possible policies to support crop diversity, which will motivate farmers to make better choices, boost production, and improve food security in the study area.

Agency motives and the corporate diversification decision: perspectives of corporate executives in Nigeria

PurposeThe purpose of this study was to explore the motives (especially the agency motives) for corporate diversification from the perspective of corporate executives who make such strategic decisions and manage the diversified firms daily.Design/methodology/approachA qualitative research approach was adopted, and 12 chief executive officers (CEOs) of diversified firms in Nigeria were interviewed for their perspectives on the motives for corporate diversification.FindingsStewardship motives – diversification to use excess capacities in assets and resources to exploit opportunities in the market and defend against adverse environmental developments – were the most cited reasons for diversification. The relevant agency problem related to corporate diversification motive in Nigeria is the principal–principal (majority shareholder-minority shareholder) one. CEOs with substantial holdings in their firms indicated that they use diversification to reduce their investment risk and retain control of their portfolio.Practical implicationsThe findings suggest that in corporate environments such as Nigeria that feature blockholding prominently, the corporate strategy-related agency problem that policymakers should pay greater attention to is the principal–principal conflict rather than the traditional agent–principal problem that has influenced corporate governance over the years. There is also a need to revise the dominant view that diversification is a value-destroying strategy motivated by the self-seeking behavior of managers who have little or no shares in the companies they manage.Originality/valueThe few studies on motives for corporate diversification that incorporated the perspectives of corporate executives did not address the agency motives of diversification. To the best of the authors’ knowledge, this is the first study that has done so.

The Productivity Effects Of Corporate Diversification*

AbstractThis paper studies the productivity effects of corporate diversification. I estimate a model that allows diversification decisions to affect future productivity. I apply the model to a panel of U.S. manufacturing firms to measure the impact of diversification on productivity. My estimates suggest that diversification plays a key role in explaining differences in productivity across productive units and time. The average productivity effect of diversification is estimated to be positive at the productive unit level. However, the effect varies considerably across productive units and sectors of activity, depending crucially on already attained productivity.

Diversification as an adaptive learning process: an empirical study of general-purpose and market-specific technological know-how in new market entry

Abstract An enduring trait of modern corporations is their propensity to diversify into multiple lines of business. Penrosian theories conceptualize diversification as a strategy to exploit a firm’s fungible, yet “untradeable,” resources and point to the redeployment of technological know-how as an important driver thereof. However, less understood are the characteristics of technological assets that underlie firms’ diversification decisions and the impact that diversification has on firms’ subsequent development of technologies. In this paper, we expand the existing theories in two ways. First, we argue that central to understanding firms’ diversification decisions is a distinction between their technological assets that are applicable to many markets and ones that are useful in only a limited number of contexts. To this end, we develop a novel way to characterize technologies along a continuum from highly general-purpose to highly market-specific. Second, we explore empirically the idea that diversification is an adaptive learning process involving both the exploitation of existing capabilities and the creation of novel ones. Using data on three decades of patenting and diversification histories of 28,376 firms, we find that (i) a firm’s possession of general-purpose technological assets is positively associated with its decision to diversify and (II) firms that enter a new industry through diversification develop technologies that are specialized to the target industry. Our findings have implications for understanding firm growth, diversification, and evolution.

Does ICT-based agriculture extension service use promote litchi farmers' involvement in diversification? Evidence from Southern China

This paper investigates the effects of ICT-based Agriculture Extension Service (IAES) use on farmers' diversification decision using a cross-sectional survey over 928 litchi growers in southern China. To solve the endogeneity problem, a recursive bivariate probit (RBP) model is employed. The RBP model result indicates that IAES use increases the probability of farm diversification by 24.7%. Moreover, the findings suggest that IAES use has a positive impact on litchi growers’ decision on livestock integration, but has no impact on intercropping. In the light of the findings of this study, government should promote the use of IAES to advance sustainable intensification of agriculture and secure rural livelihoods.

Crop diversification as a household livelihood strategy under environmental stress. Factors contributing to the adoption of crop diversification in shrimp cultivation and agricultural crop farming zones of coastal Bangladesh

Environmental stressors, potentially aggravated by climate change, pose significant challenges to households whose livelihoods rely primarily on crop production in agriculture or aquaculture, particularly in countries of the Global South. In this context, diversified farming systems, or crop diversification, have been discussed as one adaptation strategy of smallholder farming households to reduce their livelihood vulnerability and increase farm resilience. In coastal Bangladesh, livelihoods based on cultivation of shrimp, prawn, fish, paddy (rice) and other crops are likely to become more vulnerable with accelerated sea level rise, extreme flooding events, cyclone activity, river bank erosion and salinization. While crop diversification in Bangladesh is still low overall, it has been increasing. To understand the factors driving the uptake of diversified cropping in different farming production contexts and allow for policy measures addressing regionally specific needs, we explore the (relative) impact and significance of relevant factors contributing to the adoption of crop diversification practices for (i) shrimp cultivation and (ii) agricultural crop farming zones. We specifically include variables representing subjectively perceived risks to study their role in climate change adaptation. Our findings are based on a quantitative household survey (n = 1188) in nine purposefully selected unions across the Bangaleshi part of the Ganges-Brahmaputra-Meghna delta to capture the diversity of the region. Our results show that the prevalence of crop diversification measures is relatively high in the shrimp cultivation zone, but relatively low in the agricultural crop farming regions. In sum, the results show that even though direct economic factors seem to be (still) more important for diversification decisions, our study also suggests that perceived environmental threats and changes can have a favourable influence on crop diversification and should hence be included in studies investigating causes for land use changes. Yet, there are significant differences with regard to the influence of specific factors on the likelihood to diversify in the two respective zones. We conclude that greater uptakes of agriculture and aquaculture diversification could represent a promising and more sustainable approach for smallholders in coastal Bangladesh given appropriate supportive institutional conditions and measures that address specific needs of local communities. A “one-size-fits-all” approach to pushing crop diversification is unlikely to produce adequate and sustainable results.

Interconnectivity and investment strategies among commodity prices, cryptocurrencies, and G-20 capital markets: A comparative analysis during COVID-19 and Russian-Ukraine war

Economic and political disorders have multidimensional impacts on all economies around the world. The global world has faced out COVID-19 pandemic in 2020, and now the Russian-Ukraine geopolitical crisis. This study investigates the nexus among commodities, crypto, and G20 capital markets along with risk and returns implications. To examine the impact, we applied the TVP-VAR technique suggested by Koop and Korobilis (2014), and Antonakakis, Chatziantoniou, and Gabauer (2020) by adjusting the framework of Diebold and Yilmaz (2012). The research findings reveal that a high level of connectedness was observed during Covid-19, which was persistent for a long period and has multidimensional impacts. More particularly, EU, Canada, France Germany, and the UK were the principal supplier of spillovers to other commodities, Bitcoin, and the remaining markets. During Geopolitical Crisis (here after GPC), conclusively it is observed that of USA, Brazil, Saudi Arabia, Canada, Mexico, China, Indonesia, and Japan are the net receivers of the volatility spillovers and Russia, Germany, France, European Union, Italy, UK, Argentina, India, Australia, Turkey, Korea, and South Africa are the net transmitters of volatility spillovers. Interestingly, among net transmitters Argentina, South Africa and Turkey are suffered from high inflation and substantial budget deficits, considered as weak economies of G20. Portfolio weights has been increased dramatically during COVID-19 and Russian-Ukraine war. This research could be utilized to take investment, hedging, and diversification decisions about commodities, cryptocurrencies, and stocks, particularly in such turmoil situations with the help of connectedness and various hedging techniques.

Weather shocks, livelihood diversification, and household food security: Empirical evidence from rural Bangladesh

AbstractExtreme weather events have occurred more frequently because of global climate change. For farmers, diversification, including crop and income diversification, is one of the most effective strategies to improve rural livelihoods by managing risk and coping with weather shocks. We investigate the empirical linkages among weather shocks, livelihood diversification, and household food security, exploiting three waves of nationally representative rural household panel data merged with granular weather data in Bangladesh. Using instrumental variable methods to control for the possible endogeneity of livelihood diversification decisions, we find that weather shocks are significant drivers of crop and income diversification. Moreover, both crop and income diversification are found to impact per capita food expenditure, while their effects on household dietary diversity are not robust. In particular, the distributional effects of income diversification are uniformly positive and significant for all quantiles of a per capita food expenditure distribution but are more sizable for the richest households. The findings, therefore, highlight the unequal effect of livelihood diversification within the context of rural South Asia, suggesting the need for diversification interventions targeting rural low‐income groups with the goal of improving socioeconomic status, institutional conditions, and infrastructure.

Revealing Integrated Product and Geographical Diversification Trajectories in Multinational Pharmaceutical Enterprises

Multinational Enterprises (MNEs) periodically decide on both which products to launch (or phase out) and in which global regions, thereby conducting an integrated products-countries consideration in diversification strategies. Over time, these diversification decisions can have a cumulative impact on the structure. Diversification literature has primarily focused on one of these two metrics rather than providing an integrated view; this work investigates both metrics. Considering deal-making as an execution instrument of strategies, a comparison of historic deals of MNEs with their current structure offers insights into the nature of the diversification strategies that were pursued. For the most active global deal-making pharmaceutical firms, we derive normalized deal diversity profile metrics in terms of their cumulative past product-countries’ preferences and compare them with the product-countries’ operations of their current subsidiaries. We rationalize MNE deal behaviors as means to shed, acquire and consolidate businesses to enable their market leadership aspirations. The analysis reveals two trajectories that have been actively favored in deals: one directed at niche products offered globally, and one directed at niche products in selected countries. The former is characterized by deals in a high number of countries, whereas the latter by two identifiably different product concentration levels. In contrast, trajectories directed at widely diverse products have been disfavored in deals. Understanding such directions and their pace can aid in global- or group-level strategy formulation, monitoring strategy execution, interpreting competitor moves and designing regional policies.

A Business Case Study on Aspiring Rural Giant - The Mishra's

Retail Industry is one among the leading sectors in the Nation. The Investors in Retail sector have been in the positive sphere provided they match to the demand – supply avenues. Another prominent Sector in the Nation is the LPG Sector. The same falls under necessity and the Government has been pretty concerned with the LPG Industry and its promotion. This Case is about a Family run business with family members being the Partners to the businesses in the Retail & LPG sectors. The Businesses of the Family is located at Majhauli Road, Prangarhi, Mairwa, Dist. Siwan, Bihar - 841239. The LPG Business is run under the name of Baba Consultancy & Company (BC & C) Indane Gas Agency and the Retail business with Parent name as M-Retail with operation of franchise business – Citi Megamart. The Case study reflects the Rural challenges for the business with context to LPG and Retail Business. The case expects the resolution pertaining to its future operations and analyzing its diversification decisions. The present case is a type of Teaching case with a focus on the Illustrative & Appraisal Case approach. The Mishra’s (Partners) are progressing well with more of aspirations for their business. In the year 2022-23 the business is now into the business appraisal process.

Related adjustment of firm production after demand shocks.

Multiproduct firms often diversify into technologically related activities to exploit efficiencies of joint production; however, unrelated products in the company's portfolio provide access to distinct markets and can help to avoid industry-specific shocks. Yet, the underlying mechanisms of related and unrelated diversification are still poorly understood. Here we investigate diversification decisions of firms in periods when corporations' markets are hit by a demand shocks. In these times, cost efficiency considerations might drive firms to reduce costs by narrowing product portfolios and focusing on combinations of technologically related products, in which economies of scope and mutual capabilities can be exploited. To test this hypothesis, we consider two measures of demand shocks, decreasing sales volumes on the product market and increasing import competition; and analyze their association with changes of product portfolios of Hungarian firms in the 2003-2012 period. We find that production has become more coherent in terms of technological relatedness after firms were exposed to demand shocks. Evidence suggests related adjustment of firm production after demand shocks such that products unrelated to firms' core product are dropped from the portfolio but related products are added.

Evolution of farm-level crop diversification and response to rainfall shocks in smallholder farming: Evidence from Malawi and Tanzania

This study investigates how exposure to short and long-term measures of rainfall shocks and past crop diversification decisions influence subsequent diversification in Malawi and Tanzania. We use balanced household panel data combined with corresponding historical monthly weather data to achieve our aim. Crop diversification is studied as a state-contingent risky investment decision that households make before the state of nature is revealed. We model crop diversification decisions using correlated and dynamic random effects panel Poisson and Tobit models that control for unobserved heterogeneity in household crop diversification decisions plus initial conditions that may influence crop diversification across space and time. We establish that smallholder farmers in Malawi and Tanzania respond to rainfall shocks by diversifying their crop portfolios and that crop diversification decisions are state-dependent. Thus, farmers with knowledge and experience gained from past crop diversification have elevated chances to intensify subsequent crop diversification and adapt to recurrent rainfall shocks. Heterogeneity analysis reveals that the relatively better-off farmers with sufficient land and non-land household assets to a greater extent diversify the crop portfolio post-drought shock exposure. Pro-poor policies addressing seed access constraints are needed to support diversification and adaptation to shocks.

SOCIOECONOMIC DETERMINANTS OF LIVELIHOOD DIVERSIFICATION AMONG ARABLE CROP FARMERS IN SHENDAM, PLATEAU STATE, NIGERIA

Livelihood diversification is an integral component of household income. Diversification determinants were estimated. Multistage sampling was adopted, and primary data were analyzed using descriptive statistics and Logit regression. Socioeconomic factors affected livelihoods. Several diversification activities and derivable benefits are indicated. Variations in diversification decisions were attributable to the regression variables. Policy modifications and strategies that improve livelihoods are recommended.

Crops in crises: Shocks shape smallholders' diversification in rural Ethiopia

Crop diversity plays a central role in smallholder farmers' ability to cope with and adapt to shocks. Shifting crop varieties and diversifying the crop portfolio are common risk reduction strategies. This paper addresses the influence of covariate climate shocks and idiosyncratic socioeconomic shocks on crop variety use and crop species diversification by smallholder farmers using nationwide balanced panel data (2011/12, 2013/14, & 2015/16) from rural households in Ethiopia combined with village-level historical monthly rainfall and temperature data. We apply correlated random effects models, which control for time-invariant household unobservables. Past exposure to drought shocks increased the use of improved seed varieties in general and for wheat, while long-term average rainfall and lagged flood shocks enhance crop species diversity. Lagged temperature shocks increase improved seed use and crop species diversity. However, recurrent drought exposure and exposure to relatively more severe drought shocks significantly reduced overall agricultural activity. Idiosyncratic shocks, to a much lesser degree, influenced seed use and crop diversification decisions compared to covariate drought shocks. Heterogeneity analysis revealed that drought shock exposure on farmers with less than average farm sizes and other assets - compared to those better-off – increased their relative reliance on local seed use, reduced crop diversification, and reduced improved seed use. The results are robust to various sensitivity checks. Our findings are relevant for policy responses aiming to strengthen smallholders' ability to cope with and adapt to shocks: farmers' seed-based risk reduction strategies rely on access to seeds from both formal and informal seed systems, but policies addressing economic inequality are needed to enhance access to improved seeds and crop diversity for resource-poor socioeconomic groups.

The Role of the Board in Unrelated Diversifications: Evidence from an Acquisition Wave in China

Unrelated diversifications are generally more viable in underdeveloped institutional environments because internal markets within the diversified firm can substitute the inefficient external ones. Using a sample of 498 major acquisitions undertaken during an acquisition wave by Chinese listed firms, we find acquiring a target firm in an entirely different industry can cause more severe goodwill impairment losses in the following two to four years, which indicates that acquirer managers tend to overestimate the synergistic gains they could realize in unrelated diversifications. Moreover, a capable board of directors can provide information advantages through outside directorship ties, structural hole position in the interlock network, and specialized committees, thus limit managers to make value-destroying diversification decisions. Further analysis suggests investors tend to prefer such unrelated acquisitions during the acquisition wave, indicating that shareholder expectations drive managers to diversify. By examining the role of boards as information conduits and advice-providers in limiting the cost of diversification in an underdeveloped institutional environment, this study contributes to the literature on diversification, acquisition and corporate governance.

An institutional approach on the effects of diversification type

PropósitoEn este estudio, argumentamos que hay más en los efectos sobre el desempeño posterior a la adquisición y la diversificación de lo que parece. Proponemos que las condiciones que permiten mayores rendimientos dependen del contexto institucional. Sugerimos que las estrategias de diversificación difieren en su impacto sobre el desempeño posterior a la adquisición cuando se ven atenuadas por las ineficiencias institucionales del país.MetodologíaEsta investigación se basa en un enfoque cuantitativo. Probamos estadísticamente las hipótesis con base en análisis de regresión múltiple.ResultadosLos resultados muestran un efecto moderador negativo de las ineficiencias institucionales en el país objetivo sobre la relación entre las decisiones de diversificación de una empresa y su desempeño posterior a la adquisición. Así, las firmas latinoamericanas que realizan M&A con un mayor grado de diversificación se relacionan con un peor desempeño. Sin embargo, el grado de ineficiencias institucionales modera negativamente esta relación, atenuando los efectos negativos de la diversificación sobre el desempeño.OriginalidadInvestigaciones anteriores han demostrado que las economías con altas ineficiencias institucionales pueden beneficiarse de niveles más altos de diversificación, ningún estudio ha considerado el impacto de las ineficiencias institucionales cuando se analiza de varios países. Proporcionamos evidencia de que, en el caso de las empresas latinoamericanas, la diversificación reduce el desempeño, pero el grado de ineficiencias institucionales modera negativamente esta relación.

Performances of Islamic and conventional equities during the global health crisis: Time‐frequency analysis of BRICS+T markets

AbstractThis study investigates the dynamic linkages and spillover effect between emerging economies (BRICS and Turkey), focusing on global crises, notably the COVID‐19 pandemic. The study uses daily frequency data covering the period from 2002M5 to 2021M03. For the methodology, the paper employs Wavelet Coherence for multiresolution time‐frequency analysis in addition to the frameworks of Diebold‐Yilmaz Connectedness Index (DY12) and Barunik‐Krehlik Frequency Connectedness Index (BK18). The empirical results reveal that the stock market comovements among sample markets are non‐monotonous and depend on the time and frequency of returns. Significant correlations among the sample countries and a spike in overall spillover are also evident at the outbreak of the COVID‐19 pandemic or the Global Health Crisis (GHC). China, Brazil, Russia, and Turkey with all the other markets, experienced the weakest links during the GHC. Brazil, Russia, and South Africa act consistently (across different horizons) as net transmitters, whereas India, China, and Turkey perform as net receivers. Islamic equities are more likely to “give” and less prone to “receive” than conventional equities. Compared to the Global Financial Crisis (GFC), the GHC effect is more severe but short‐lived. The findings of this study are helpful to policymakers and diverse investors when making portfolio diversification decisions.

Diversification Decisions of Family SMEs under Uncertainty: Goals as a Rule of Thumb

Abstract Leveraging on the behavioural mixed gamble lens, we contend that heterogeneity in organisational goals leads to different diversification behaviours in family firms. Using survey and archival data on a sample of 988 family SMEs homogenous in their (high) family involvement level, we show that family SMEs that pursue nonfinancial (financial) goals exhibit lower (higher) probability of extending the boundaries of the firm to new product and/or market domains. Interestingly, in the face of threats, only those family SMEs that prioritise financial goals exacerbate their propensity to diversify, while increased vulnerability leads to an even lower probability of adopting diversification decisions among family SMEs with nonfinancial goals.

A double hurdle estimation of crop diversification decisions by smallholder wheat farmers in Sinana District, Bale Zone, Ethiopia

BackgroundEthiopia is heterogeneous in agro-ecological, social, and economic conditions. In such heterogeneous environment, crop production needs to be diversified to meet household consumption and market needs. This study analyzed determinants of crop diversification in wheat dominant producer rural households in Ethiopia’s Sinana District of the Oromia Regional State. The study utilized a structured survey of 384 households, and both inferential and descriptive statistics were employed to analyze the data. A Cragg’s double hurdle model was applied to identify factors influencing decision and the extent of crop diversification.ResultsWe found that decision to crop diversification was positively associated with household size, access to fertile farm plots, and access to extension services and negatively associated with age of household head, and participation in off/non-farm activities. The extent of crop diversification is positively associated with access to extension services, labor availability, membership to farmers cooperatives, and distance to market.ConclusionsThese findings support the need for resources to strengthen available extension packages, support existing farmers’ cooperatives, and develop rural infrastructures in order to improve the smallholder farmers’ extent of crop diversifications.