Related Diversification Research Articles

Exploring the nexus between exports’ economic complexity and institutional quality: insights from Italian provinces

ABSTRACT The present research aims to investigate the determinants of economic development and productivity by proposing an empirical analysis of the economic effects of institutional quality on the economic complexity of export at the intra-national level, focusing on 103 Italian provinces from 2004 to 2016. Using the System Generalised Method of Moments (System-GMM) estimator, the study assesses the influence of various institutional dimensions on provincial economic complexity, as measured by the Economic Complexity Index (ECI). The findings indicate that institutional quality, particularly rule of law, regulatory quality, and voice and accountability, significantly enhances economic complexity. Better formal and informal institutions such as completeness of contracts, social cohesion, contract enforcement, by reducing transaction costs and uncertainty, and by favouring knowledge dissemination and security of investments, are source of comparative advantage in complex industries that lead to diversified and sophisticated production, fostering economic growth and innovation. Moreover, the study emphasises the importance of related activities, which interact with institutions to support complex and innovative export-related activities through knowledge spillovers and related diversification. The analysis also highlights the pivotal role of human capital, social capital, and innovation, which should remain focal points for policymakers.

The Canadian Pacific Railway's diversification strategies: A financial performance story, 1883–2020

The diversification and financial performance literature is ambiguous. To shed light on this relationship, quantitative and qualitative research was used to study the Canadian Pacific Railway (CPR) from 1883 to 2020. The CPR was selected because of its extensive archives and past range of diversification activities. Most of CPR's diversification investments were unrelated and unsuccessful. There is a statistically significant negative relationship between diversification and operating income/Tobin's Q. This negative relationship can become U-shaped or even positive by increasing operating income via reduced costs, improved conversion of inputs into outputs, and improved service to customers. The absence of diversification is not sufficient to significantly increase performance; satisfactory financial performance only comes from increasing operating income. These findings contribute to understanding the nuanced relationship between diversification and financial performance, highlighting the advantages of pureplay and the necessity for continuous financial performance improvement with related diversification and even pureplay.

Economic policy uncertainty and capital structure in Europe: an agency approach

Motivated by the unprecedented levels of economic policy uncertainty (EPU) recently experienced in Europe, we study how EPU affects capital structure and whether cultural, institutional, and financial conditions and corporate diversification moderate this relationship in a sample of 3175 firms from eleven European countries. Firstly, our results indicate that financial leverage is positively related to EPU, with this relationship being moderated by uncertainty avoidance, institutional quality, and financial development. Secondly, corporate debt is positively related to corporate diversification. This relationship is stronger for unrelated than for related diversification. In addition to the direct effect, both types of diversification indirectly moderate the positive influence of EPU on leverage, with this effect being stronger for unrelated diversification. Our results show that debt and uncertainty avoidance, institutional quality, and financial development work as substitute mechanisms to alleviate the agency costs caused by EPU and that corporate diversification reduces the informational gap between firm insiders and outside investors exacerbated by EPU.

Do Firms Proactively Build Internal Markets for Redeployment? Evidence from a Natural Experiment

The topic of related diversification is of fundamental interest to corporate strategy research. However, the understanding of how the potential for resource redeployment might encourage related diversification is limited. This paper explores the impact of the 2006 German real estate transfer tax (RETT) reform, which led to higher RETT rates but retained the exemption from RETT for corporate restructurings. We propose that firms might have reacted strategically to the threat of higher transfer taxes by combining related businesses into a portfolio, providing an efficient internal market for reallocating property assets in the event of business-specific shocks. Consistent with a dynamic perspective on relatedness, difference-in-differences analyses of the European retail market show that the probability of related diversification increased significantly for firms that were affected by the reform, relative to control firms. This finding contributes to the literature that links firm boundary choices to intertemporal economies of scope and offers new insights into the real effects of transfer tax policies. This paper was accepted by Alfonso Gambardella, business strategy. Funding: This work was supported by the Ministerio de Ciencia, Innovación y Universidades [Grant PID2020-115660GB-I00]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2021.02396 .

How regions diversify into new jobs: from related industries or related occupations?

ABSTRACT This paper adds a multidimensional perspective to the study of related diversification. We examine how regions diversify into new jobs – defined as unique industry-occupation combinations – asking whether they do so from related industries or related occupations. We use linked employer-employee data for all labour market regions in Norway, covering the time period 2009–2014. Diversification into new jobs is more likely in the presence of related occupations and industries in a region. Furthermore, occupational and industrial relatedness have complementary effects on diversification. Occupational relatedness and its interaction with industrial relatedness are particularly important for diversification into more complex activities.

Regional diversification and intra-regional wage inequality in the Netherlands

ABSTRACT The literature has shown that related diversification in more complex industries enhances economic growth in regions but also inter-regional inequality. However, it has drawn little attention to the relationship between industrial dynamics (i.e., the rise and fall of industries) and intra-regional wage inequality. This explorative study examines the relationship between industry dynamics and wage inequality in NUTS-3 regions in the Netherlands in the period 2010–2019. Our study shows that related diversification in less complex industries tends to reduce wage inequality within a region. This implies it remains a policy challenge to combine smart and inclusive growth in regions. Our study also showed that there is no significant relationship between the exit of industries and regional inequality, with one exception: unrelated low-complex exits tend to increase intra-regional wage inequality. Overall, these findings suggest that related diversification in less complex industries tends to bring benefits in terms of inclusive growth, while unrelated exits in less complex industries tend to do the opposite.

Effect Of Diversification on Organizational Performance of Selected Manufacturing Industries in South West Nigeria

The need for the adoption of diversification strategy became germane because of challenges which impede organizational performance. This study thus examined the effect of diversification on organizational performance of selected manufacturing industries so in south west Nigeria. Some studies of strategic study have investigated on the effect of diversification on organizational performance in manufacturing industries in Nigeria but have come up with inconclusive findings which create a gap that this study wants to fill. The specific objectives of the study are to examine the effect of related diversification on organizational performance and investigate the effect of unrelated diversification on organizational performance in manufacturing industry. Ex-post facto research design was used for the study. The population consists of employees of 22 manufacturing industries listed in Nigerian Exchange Group between 2011-2020 dealing in Food and Beverages, Breweries, Health care/Pharmaceutical and Conglomerates. The sample size comprises eight manufacturing industries with 750 employee’s selected using stratified sampling technique and selected according to 50% proportion of original sample size. Data were drawn from primary and secondary sources. Descriptive statistics was used to explain the respondent’s characteristics and inferential statistics was used to analyze data collected. Findings revealed that related diversification have significant effect on organizational performance F (4, 745) = 11.988, p < 0.01, R= 0.651, R2 = 0.424, and adjusted R2 = 0.419). Unrelated diversification however have significant but negative effect on organizational performance F (4, 745) = 11.982, p < 0.05, R = -0.466, R2 = 0.217, and adjusted R2 = 0.208). The study concluded that related diversification increase organizational performance while unrelated diversif

Tectonically driven climate change and the spread of temperate biomes: Insights from dragon pseudoscorpions (Pseudotyrannochthoniidae), a globally distributed arachnid lineage

AbstractAimUnderstanding the historical biogeography of the Earth's oldest terrestrial lineages provides insights into lineage diversification in relation to plate tectonics, climate change and biome shifts at maximum timescales. We investigate the biogeography of an ancient arachnid family, dragon pseudoscorpions, which are found today in mesic (mostly temperate) forests on all continents except Antarctica and Europe, have potential origins on Pangea and comprise species with extremely limited dispersal capacities. We evaluate the respective role of continental vicariance (abiotic) and biome shifts (biotic) deep in time and unravel the evolutionary history of this ancient group.LocationGlobal.TaxonPseudotyrannochthoniidae (Arachnida: Pseudoscorpiones).MethodsFive loci were sequenced for 75 Pseudotyrannochthoniidae samples collected across the globe. A matrix was compiled comprising 106 terminals and ~8800 bp, and phylogenetic analyses were performed to uncover relationships. Divergence time and ancestral range estimation analyses were used to reconstruct historical biogeography.ResultsPseudotyrannochthoniidae was monophyletic with high support but relationships among genera did not reflect current taxonomy and instead showed geographical structuring. Pseudotyrannochthoniidae originated in East Asia during the Middle Triassic and began diversifying in the Early Cretaceous.Main ConclusionsDiversity and distributional patterns of dragon pseudoscorpions can be explained by the interplay of continental vicariance through Pangaean breakup, and biome shifts via the spread of temperate habitats in the Cretaceous and their ongoing distributional fluctuations. Pseudotyrannochthoniidae diversification began in the Early Cretaceous as they dispersed with temperate forests across the Northern Hemisphere. Cretaceous vicariance, followed by widespread Holarctic extinction in the Late Tertiary–Quaternary, created their disjunct distribution at northern latitudes. Northern and Southern Hemisphere lineages diverged as Gondwana and Laurasia rifted, and Gondwanan breakup resulted in Afrotropical/Indomalayan and Austral clades. Austral lineages spread with temperate forests, however, cooling caused their disappearance from Antarctica and led to disjunct distributions at low latitudes.

Analysis of the effect of growth strategies and hotel attributes on performance

PurposeIn this vein, this paper aims to provide empirical evidence on the following questions: Which expansion strategies offer better operational and economic performance? What effects does performance-related diversification have? How do other factors such as size, quality, service offered, location or seasonality interact with performance.Design/methodology/approachIn this paper, the analysis of the effects of growth strategies and hotel attributes on performance is carried out with a sample of 255 hotels that operate internationally. Using panel data and quantile regression, this study evaluates the effect of expansion and diversification on the hotels’ performance.FindingsFrom these findings, it appears that the equity strategy (own hotels) outperforms non-equity strategies (hotels under rental, franchise and management contract) at the operational level. However, the economic return of the property, both adjusted and unadjusted to risk, is lower under the property ownership strategy than under the franchise and management strategies because, in general, it requires a higher investment. Regarding diversification, the growth strategy based on related diversification in food and beverage services has a negative impact on performance, calling into question the synergies between the two businesses. However, an exception to this effect is seen among those hotels, mainly those in the Caribbean, that opt to provide all-inclusive services, since these hotels achieve better occupancy rates and more stable results.Research limitations/implicationsThis study has not taken into account the effect of hotel property revaluation on the performance of the ownership strategy, as there is no information on the historical average revaluation at the level of each individual hotel. This study has also been unable to include information regarding the level of competition and seasonality of sales.Originality/valueThis paper considers a wide number of factors that can influence the performance of hotels. Second, this is the only paper that studies the impact of growth strategies from the point of view of the hotel chain. Also, the sample considered uses data at the individual level on hotels and this research analyses not only operational performance but also economic performance.

Moderating Effect of Government Policies and Regulations on the Relationship Between Diversification Strategies and Organizational Performance Among Star Rated Hotels in the Kenyan Coast

Nowadays, organizations must exploit opportunities and avoid risks by applying relevant strategies and developing various strategic approaches that will improve their competitive edge and overall performance. One of the possible ways to improve business efficiency and performance is through diversification in light of available government policies and regulations. The purpose of this study was to evaluate the moderating effect of government policies and regulations on diversification strategies and organizational performance amidst organizational and environmental forces within star rated hotels in the coast region of Kenya. The specific objectives were; to determine the moderating effects of government policies and regulations on the relationship between diversification strategies and organizational performance among star rated hotels in the Kenyan Coast. Notably, 36 star rated hotels were selected while 419 respondents were involved which comprised; strategic managers, tactical and operational managers. This represented a response rate of 92.4% and 80.6% for the questionnaires and interviews respectively. Stratified sampling was used to select the hotels while purposive sampling was used to select the managers. Questionnaires and interview schedules were used during data collection. Data analyze was both analyzed using both descriptive and inferential analysis. The model summary results indicate that R-Square value improves (from 0.598 to 0.617) when the moderating variable (Government policies and regulations) was added to the regression model. This means that government policies and regulations improve the relationship between related diversification strategies and performance of star rated hotels in the Kenyan Coast. The model summary results in Table 5 show that the value of R-Square improves from 0.558 without the moderating variable to 0.670 with the moderating variable. The moderating variable therefore improves the relationship between unrelated diversification strategies and performance of star rated hotels in the Kenyan Coast. The null hypothesis “Government policies and regulations do not have a significant moderating effect on the relationship diversification strategies with performance of star rated hotels in the Kenyan Coast” was rejected. In conclusion, government policies and regulations have a significant moderating effect on the effect of diversification strategies on performance of star rated hotels, annihilating the simple linear relations between predictor and outcome variables. The government should encourage diversification among hotel industry by providing favourable environment to conduct business through reduced tax and subsidies especially during economic turbulence.

INTERCONNECTION OF DIVERSIFICATION AND VALUE BASED MANAGEMENT IN SMALL WHOLESALE BUSINESS

In the paper, we found out types of diversification suitable for small wholesale business in Ukraine in wartime. The most suitable types of diversification are: service, product, financial and geographic diversification. Also, horizontal, vertical, conglomerate and concentric types of diversification can be applied, taking into account their benefits and potential pitfalls defined in this paper.We also considered diversification as a value-creating strategy, outlined its main benefits and pitfalls. It offers several benefits, such as risk reduction by spreading investments across industries, thus reducing dependence on one market. It allows for synergies in related diversification through shared resources and expertise, enhancing efficiency and profitability. Additionally, diversification enables portfolio optimization, balancing performance across various sectors. However, it entails challenges like integration difficulties, potential overextension, and the risk of not realizing expected synergies. Effective diversification requires a clear strategic rationale, meticulous execution, and continuous monitoring, with willingness to divest from underperforming areas to sustain value creation.We suggested using Value Chain Analysis for choosing the most effective strategy of diversification for small wholesale business and developed Value Chain of a Small Wholesale Business (particularly, with heating equipment wholesale as a main type of activity).By understanding how each activity affects customer value, businesses can tailor their strategies to enhance customer satisfaction and loyalty. This might involve improving product quality, customer service, or any other activity directly impacting the customer experience.Value Chain Analysis is a strategic lens through which a business can view its activities and make informed decisions about where to focus its resources to maximize value creation.The next step of choosing the most effective value-creating strategy is building a Value Drivers Tree for each strategy considered and choosing the one creating the highest value of business.

Impact of Related Diversification Strategies on Organizational Performance among Star Rated Hotels in the Kenyan Coast

Purpose: For any organization to succeed in the present competitive and ever-changing business environment, understanding the risks, opportunities, and strength posed by the external environment is inevitable. Organizations must exploit opportunities and avoid risks by applying relevant strategies and developing various strategic approaches that will improve their competitive edge and overall performance. One of the possible ways to improve business efficiency and performance is through diversification. The purpose of this study was to assess the applicability of a diversification strategy as a game plan to motivate and develop resilience against organizational and environmental forces in business operations to improve organizational performance in star rated hotels in the Coastal Kenya. The specific objectives was; to determine the impact of related diversification strategies on organizational performance among star rated hotels in coastal Kenya Coastal.
 Materials and Methods: Notably, 36 star rated hotels were selected while 419 respondents were involved which comprised; strategic managers, tactical and operational managers. This represented a response rate of 92.4% and 80.6% for the questionnaires and interviews respectively. Stratified sampling was used to select the hotels while purposive sampling was used to select the managers. Questionnaires and interview schedules were used during data collection. Data analyze was both analyzed using both descriptive and inferential analysis. The mean for overall adoption of horizontal diversification strategies was 3.94 (std. dev=0.92) while vertical diversification strategies was 3.28 (std. dev=1.13) which was significant. The mean on overall adoption of related diversification strategies was 3.60 (std. dev=0.95), demonstrating that related diversification strategies have on overall been adopted to a large extent.
 Findings: The model summary results indicates that R-Square=0.598; this implies that 59.8% of performance is explained by vertical and horizontal diversification strategies. This implies that, both horizontal and vertical diversification strategies were significantly adopted in the operation and management of hotel business in the coast region of Kenya. The null hypothesis stating, “There is no significant relationship between vertical diversification strategies and performance of star rated hotels along the Kenyan Coast” was rejected. This means that horizontal and vertical diversification strategies are significant predictors of performance of star rated hotels in the Kenyan Coast. From the regression model, horizontal and vertical diversification were found to have a positive effect that was statistically significant on performance of star rated hotels in the Kenyan Coast.
 Implications to Theory, Practice and Policy: Policy makers should initiate policies that motivate organizations such as hotels to practice diversification to minimize negative impact on both financial and non-financial performance aspects.

Identifying patterns of countries’ industrial diversification

Technological development is an evolutionary process that often takes place alongside the existing manufacturing industries and is known as related diversification. However, this is not always the case. Research has shown that some countries try to develop differently, meaning that they may begin producing types of products that are very different from those they created before. In this research, we first try to find out which countries adopted a diversification strategy unrelated to the previous stages in their growth path. We did this for 92 countries, with 787 products between 1962 and 2016 and found that in 884 cases (involving several products at different points in time), countries diverged from related diversification and embarked on activities unrelated to their previous ones. In the second step, we investigated these changes from different perspectives, including industries, producing countries, and years, to explore how unrelated diversification may occur. We showed that machinery is an industry that offers many opportunities for manufacturing countries. Not only does it include the newest products, but also it has first ranking in producing unrelated and complex commodities. When considering different countries, it was seen that some countries have had a more successful situation in generating new products during these 54 years. Poland, 334 new products per year is in first position, followed by; Spain (306 new products; and China (279 new products). The data revealed that after 2010 entrance into new activities has been reduced among all nations, suggesting that countries may have found their path of specialization forward and further change has been difficult for them. Europe, with 4184 new products and 358 unrelated products, has the leading place among other continents. Finally, running a logit model shows us that there is a correlation of more than 0.6 between the countries joining continental cooperation organizations such as ASEAN or ECO and moving into manufacturing new products. In other words, we understand that these global contracts facilitate countries in jumping to new activities.

Phylogenetic relationships and historical biogeography of Otus species based on mitochondrial cytochrome b gene sequence

Abstract This study analyzed mitochondrial cytochrome b gene sequences to infer Otus species’ phylogenetic relationships and historical biogeography. The researchers used Maximum Parsimony and Maximum Likelihood methods to generate the phylogenetic trees. They constructed a Bayesian MCC Chronogram Tree to determine the Otus species’ age and speciation events. Paleoclimate and paleogeology maps were also used to correlate the branching out of Otus species with geological time periods and climatic conditions. The results showed five major clusters or clades for the core taxon group (Otus) and one for the sister group (Tyto). The Bayesian tree showed seven major clades for Otus, with the first speciation occurrence dating back to 21.54 mya during the Early Miocene epoch. Most of the core taxon species speciated during the Pliocene Period, with some exceptions. The paleoclimate data indicated that Otus clades branched out during the Icehouse climate state, with the first branching out occurring during the Coolhouse climatic state. The paleogeologic data revealed that the African and American (North and South) continents were already distinct and divided by the Atlantic Ocean during the first branching out of the Otus clade. The distribution areas of Otus species were also mapped using updated Wallace’s zoogeographic realms. Overall, this study provides a better understanding of the phylogenetic history of Otus species and their diversification in relation to geological and climatic events. However, the authors caution that all phylogenetic trees, evolutionary studies, and divergence time estimates should be considered hypotheses with significant uncertainty.

Rural and Urban Family Business Portfolio Growth: The Role of Entrepreneurial Legacy

Applying an inductive case study approach, we analyze four Pakistani family business portfolios and reveal that rural-based family business portfolios tend to grow internally (organically) and through related diversification. In contrast, urban-based portfolios rather grow externally through acquisitions and partnerships and pursue unrelated diversification. The family’s entrepreneurial legacy and how it is transferred to members of the next generation through grooming and imprinting in rural versus urban contexts emerge as a key underlying mechanism.

Industry diversification in industrial districts: is it about embedded regional or firm-level capabilities?

ABSTRACT We analyse whether regionally embedded or firm-level capabilities drive regional diversification in industrial districts, examining the relationship between relatedness and Marshallian agglomerations. We argue that regional diversification lacks an explicit mechanism to explain branching into new products, positing that the origin of regional product branching is based on firm-level heterogeneity of capabilities and diversification, which is overlooked. Using mixed methods and patent analysis (1895–2019; 3592 patents and utility models), product diversification in the Toy Valley district in Alicante (Spain) is analysed, showing that firm-level related diversification with extensive local search explains the mechanism of the regional relatedness diversification.

Understanding Regional Branching: Knowledge Diversification via Inventor and Firm Collaboration Networks

The diversification of regions into new technologies is driven by the degree of relatedness to existing capabilities already present in the region. In cases where opportunities for diversification are rather limited, external knowledge that spills over from neighboring regions or from farther away might become an important driver of regional diversification. Despite the relative importance of interregional knowledge flows via collaborative work, we still have a very limited understanding of how collaboration networks across regions might facilitate diversification processes. The present study investigates the diversification patterns of European metropolitan and nonmetropolitan regions into new knowledge domains via technology classes reported in patent applications to the European Patent Office. The findings indicate that externally oriented inventor collaboration networks increase the likelihood that a new technology specialization enters a region, but this external orientation is less important for related diversification than for unrelated diversification. Further, the results demonstrate that interregional collaboration networks help diversification into unrelated technologies if external knowledge sourcing is based on a diverse set of regions and if collaboration is intense within companies located in distinct regions. Within-firm collaborations across regions can compensate for missing related skills in metropolitan and in nonmetropolitan regions alike but are especially important in nonmetropolitan regions. These results provide new evidence about the importance of knowledge flows within multilocation firms in the technological knowledge diversification of regions.

Examination of related diversification in laggard regions

AbstractIn regions of meagre technology and market activities, traditional innovation metrics (patents and trademarks filed at international offices) may provide limited insight of the mechanisms of regional diversification and therefore policies, including smart specialization. We argue that in such regions, innovation activity, of lower value, can become the seed needed to grow to innovation of international calibre. We provide support by examining both domestic and international patent and trademark activity for Greece's NUTS 3 regions during 2000–2016. We further implement the principle of relatedness and show that regions with related technology (market) capabilities are more likely to exhibit new technology (market) specializations.

Corporate Diversification and Firm Performance: Evidence from the Nigerian Banking Sector

Corporate diversification plays an important role in strategic decision-making, especially when it comes to corporate expansion and growth. This study examined the impact of corporate diversification on the financial performance of deposit money banks listed on the Nigerian Stock Exchange. The study covered a ten-year period, from 2010 to 2019, and included data from the annual reports of thirteen listed deposit-taking institutions. Two accounting and one economic measure of firm performance were chosen as indices for the response variables, while the predictor variables were specialisation, related diversification, unrelated diversification and cross-border diversification. Using the panel generalised least square method, the study found that specialisation and related diversification significantly influence firm performance in the Nigerian banking sector. The study, therefore, recommends cross-border geographical expansion for deposit banks in Nigeria while maintaining services in areas of expertise.

Business groups and the impact of industry relatedness on firms' borrowing costs

PurposeThis study analyzes whether industry relatedness between a corporate borrower and its group peers significantly affects that firm's borrowing cost.Design/methodology/approachA regression analysis is run on bank-loan data of a sample of Indonesian companies for 2010–2020. The main variables of interest are the natural logarithms of the borrowing firm's number of affiliates classified within either similar 2- or 4-digit GICS industries, and the Caves weighted index of these firms' related diversification. This index measures how firms in a group are diversified in relation to the borrower. The dependent variable is the all-in credit spread, stated in basis points, over the LIBOR or similar benchmark, as of the loan issuance date.FindingsFindings support the industry-relatedness hypothesis and contradict the risk-reduction hypothesis and show that banks charge lower loan spreads on a borrowing firm that either operates within a similar industry as its affiliate or diversifies into related sectors or industries. Consistent with the co-insurance-effect hypothesis, the results also underline the importance of the parent and first-layer firms as supporting instead of the tunneling vehicles within business groups. These conclusions hold even after segregating the sample and using the loan maturity as the dependent variable.Originality/valueThis study uses a unique diversification measurement based on the borrowing firm's sector or industry, relative to other group members, and offers new insights on business group diversification and bank loan costs.