Diversification Performance Research Articles

Do Effectuation Processes Shape the Relationship between Product Diversification and Performance in New Ventures?

This study applies the lens of effectuation to product diversification and examines the moderating effects of effectuation processes on the relationship between diversification and performance in new ventures. Effectuation processes are conceptualized in terms of experimentation, affordable loss, flexibility, and pre–commitments. The findings indicate that, with the exception of affordable loss, effectuation processes exert a positive effect on the diversification–performance relationship. Theoretical and empirical implications are discussed.

How does the geographic export diversification–performance relationship vary at different levels of export intensity?

We argue that the relationship between geographic export diversification and firm performance follows an S-curve relationship if export intensity is low and an inverted U-shape if export intensity is high. The S-shape curve occurs because firms have weaker incentives to deploy the resources needed for succeeding in foreign markets if they generate relatively low revenues in export markets compared to their domestic market. Firms highly committed to export markets, in contrast, face stronger incentives to accelerate their learning curve, which results in an inverted U-shape relationship. We examine our hypotheses using a panel of longitudinal archival data with over 2000 firm-year observations, which cover all of the possible export destination countries served by large Brazil-based exporters from 2001 to 2010. Our results imply that the degree of export intensity changes the cost-benefit relationship of geographic export diversification.

Organizational learning and corporate diversification performance

This study investigates the role of organizational learning on the valuation effects of corporate diversification. The empirical findings suggest that corporate diversification reduces shareholders' wealth. However, consistent with the absorptive capacity viewpoint of organizational learning, diversification performance depends on repetitive and accumulative experiences that relate to a firm's prior diversification activity and/or a firm's experience in operating in multiple-business segments. Specifically, single-business firms that diversify once demonstrate significant value reduction. In contrast, multi-business firms that diversify once do not demonstrate value reduction, while single/multi-business firms that diversify multiple times demonstrate value creation. Findings also reveal that performance is conditional on the mode of diversification since internal growth diversification shows higher valuation effects than diversifications through acquisitions. These findings contribute to the literature by affirming the importance of organizational learning, a cognitive and behavioral perspective, in explaining the valuation effect of corporate diversification.

Financial Hegemony, Diversification Strategies and the Firm Value of Top 30 FTSE Companies in Malaysia

<p>This study investigates the relationships between financial hegemony groups, global diversification strategies and firm value of the Malaysia’s 30 largest companies listed in FTSE Bursa Malaysia Index Series during 2009 to 2012 period. We chose Malaysia as an ideal setting because the findings contribute to the phenomenon of the diversification–performance relationship in the Southeast Asian countries. We apply hegemony stability theory to explain the importance of financial hegemony groups in deciding international locations for operations. By using panel data analysis, we find that financial hegemony groups are significantly important in international location decisions. Results reveal that the stability of financial hegemony in BRICS and G7 groups enhances the financial value of the Malaysia’s 30 largest companies, whereas the stability of financial hegemony in ASEAN groups is able to enhance the non-financial value of the firms. Overall, this paper suggests that in order to diversify globally, it is necessarily for the manager in the guest country to evaluate and fully understand the host country’s geopolitical situation and its financial stability.</p>

Diversification and Community Bank Performance during a Financial Crisis

<p><em>Many U.S. banks failed or performed poorly during the recent financial crisis. Although the costliest failures were large institutions, the majority of failures were community banks (less than $1 billion in total assets). Community banks, which are considered instrumental in small business lending and employment growth, face different risks and challenges than their larger counterparts, including a lack of economies of scale and scope and exclusion from “too-big-to-fail” status. These challenges, coupled with the recent failures, motivate research into potential strategies managers can use to improve performance. This study examined the relationship between three potential diversification strategies and community bank risk-adjusted performance from 2007 to 2011. Understanding these relationships could improve management’s decision-making, allowing them to choose risk-mitigating strategies during a severe economic downturn. Herfindahl-Hirschman Indexes (HHIs) were calculated as proxies for geographic, activity, and asset diversification. Multiple regression models for each of the five years were used to calculate the impact of diversification variables on risk-adjusted ROA. The results show that diversification in all areas is directly related to performance; however, only the asset diversification relationship is significant. To the extent possible for community banks, diversification may improve risk-adjusted performance.</em></p>

Ownership Structure, Diversification, and Corporate Performance Based on Structural Equation Modeling

Executive SummaryInstead of disparately measuring relations between pairs of two measurements, in this study we use structural equation modeling to simultaneously measure the intricate inter-relationships amongst ownership structure, diversification, and corporate performance. We find that ownership concentration is positively related to corporate performance, the degree of diversification and corporate performance are negatively related, and that when examining the mediator effect of diversification between ownership structure and corporate performance, corporations decrease diversification to maintain corporate value.

"Corporate diversification, ambidexterity, and firm performance: Evidence from EMNEs"

Does organizational ambidexterity facilitate diversified firms to further enhance performance? Despite extensive interests in the effect of corporate diversification on the firm performance, the mo...

An Enhanced Artificial Bee Colony Algorithm with Solution Acceptance Rule and Probabilistic Multisearch.

The artificial bee colony (ABC) algorithm is a popular swarm based technique, which is inspired from the intelligent foraging behavior of honeybee swarms. This paper proposes a new variant of ABC algorithm, namely, enhanced ABC with solution acceptance rule and probabilistic multisearch (ABC-SA) to address global optimization problems. A new solution acceptance rule is proposed where, instead of greedy selection between old solution and new candidate solution, worse candidate solutions have a probability to be accepted. Additionally, the acceptance probability of worse candidates is nonlinearly decreased throughout the search process adaptively. Moreover, in order to improve the performance of the ABC and balance the intensification and diversification, a probabilistic multisearch strategy is presented. Three different search equations with distinctive characters are employed using predetermined search probabilities. By implementing a new solution acceptance rule and a probabilistic multisearch approach, the intensification and diversification performance of the ABC algorithm is improved. The proposed algorithm has been tested on well-known benchmark functions of varying dimensions by comparing against novel ABC variants, as well as several recent state-of-the-art algorithms. Computational results show that the proposed ABC-SA outperforms other ABC variants and is superior to state-of-the-art algorithms proposed in the literature.

Do Diversified Business Groups Help Organizational Performance?

:The superior performance of firms affiliated with business groups as compared to unaffiliated firms has not been clearly established in the literature. Previous studies examining the effect of business groups on firm performance have found varying results (Khanna and Palepu 2000a, 2000b; Chang and Hong 2002; Chu 2004). These findings are the results of analysis conducted at the aggregate level across all industries. This study examines performance of affiliated and unaffiliated firms separately across three industries in India. The results indicate that the impact of group affiliation is not uniform across industries. Further, the study examines the relationship between business group diversification and firm performance across industries after controlling for certain variables that impact performance. Findings indicate that the relationship is not unique across various industries.

Effect of Diversification Strategy, Leverage and IOS on Multi Segment Corporate Performance in Indonesia

This study examines the impact of diversification strategies, the level of use of debt (leverage) and the investment opportunity set (IOS) on the performance of diversified firms. Performance measurements using excess value (a proxy of market performance) and ROA (a proxy of accounting performance) is also discussed in this paper. This research includes measurement of diversification using the Herfindahl index and based on the number of corporate segments. The diversification strategies in this study are divided into 2 groups, namely, related and unrelated diversification of the firm’s core business. The samples of this study are taken from all the multi-segment companies listed in the Indonesia Stock Exchange (IDX) for an 11-year period from 2000 to 2010 and using panel data with a number of observations from 120 multi-segment companies (1,320 firm years). The test results indicate a negative effect of the implementation of diversification strategy on the firm’s performance. The smaller the number of segments related to the core business, the better the market performance and as well as the accounting performance. The study also indicates that there is a quadratic relationship between diversification strategy and performance, i.e. increasing the number of segments, after reaching a certain optimum point, will discount the value of the company. DOI: 10.5901/mjss.2015.v6n5s5p157

글로벌 건설기업의 다각화와 기업 성장의 관계 분석 - 해외 사업다각화와 해외 매출의 상관관계를 중심으로 -

Diversification is one of the principle strategies of company's growth. However, empirical studies for performance of diversification came up with different results. So, this study aimed to find correlation between diversification and growth for global contractors. Specifically, this study have been analyzed correlation between international diversification and revenue of global contractors in the aspect of period, company size, and core business sector. The result of the study verified that diversification of international business sectors is related to revenue growth and significantly different according to the size and the core business sector. Also, this study confirms a gradual decrease in correlation between international diversification and revenue for the past 19 years.

Diversification Performance Evaluation of Post Offices in Taiwan from Customers’ Viewpoints

Diversification adds values and increases profits to the company, and more and more post offices around the world use diversification strategies either postal or non-postal services to increase profitability. Chunghwa Post, a state-owned enterprise in Taiwan, intends to use its infrastructure for diversification to gain revenues from non-postal products and services. This case study first summarizes the satisfaction levels of five diversified products and services provided by Chunghwa Post and then makes a comparison between Chunghwa Post and its rivalries in terms of performance evaluation from customers’ viewpoints. The results show that some demographic variables have different satisfaction levels in diversified products and services statistically. In addition, Chunghwa Post has the advantage over Taiwan Railways Administration when train tickets can be picked up from post offices whereas Chunghwa Post has the disadvantage in online shopping mall services. By figuring out the strengths and weaknesses of diversified products and services, the management can decide if a particular diversified product or service is to be disregarded or vice versa. Therefore, marketing strategies can be designed for a particular diversified product or service in order to gain competitive advantage in the future.

Diversification, Industrial Synergy and Firm Performance of State-Owned Enterprises - Taking Coal Business Groups as an Example

Diversified industrial combination of state-owned enterprise is often not optimal, it can also maintain in the industry boom, but once the main market atrophy, the entire firm’s development will be in trouble, such as coal business groups. To solve this problem, this paper use industrial synergy as an intermediary variable and develop the traditional dualism, which is the relationship between diversification and firm performance, to trialism, which are relationships among diversification, industrial synergy and firm performance and take coal enterprises listing Corporations as an example to analyze relationships of above three points. Results show vertical business synergy in related diversification and horizontal function synergy in unrelated diversification are all have a significant positive impact on firm performance. This conclusion is confirmed the important hypothesis in theory that industrial synergy will promote firm performance and has important practical significance to guide state-owned enterprises’ management practice.

Product Diversification and Bank Performance: Does Ownership Depth Matter?

We empirically test whether banks’ ownership network affects the relationship between product diversification and performance for a sample of European commercial banks. We measure banks’ ownership network by the distance between the bank and its largest ultimate owner in pyramids. This measure simultaneously captures the ultimate owner’s expropriation incentives and the breadth of ownership (i.e., multiplicity and diversity of controlling owners within the pyramid). We find that diseconomies of diversification vanish the farther is the bank in the pyramid so that the farthest banks enjoy economies of diversification (higher profits, lower costs and lower risk). Further exploration shows that such economies are attributable to the presence of institutional owners and mainly to the domestic ones, potentially by delivering additional skills to manage nontraditional activities. Our findings provide insights on why banks suffer from greater activity diversification and have several policy implications.

Asymmetric effects of households’ financial participation on banking diversification

This paper examines banks’ diversification–performance nexus from the perspective of demand, the magnitude of households’ financial participation, with bank data from 22 European countries over the period from 2002 to 2009. We argue that the magnitude of households’ financial participation develops asymmetric diversification effects on banks’ performance. The empirical investigation herein provides evidence for the asymmetric influence of households’ financial participation on the effect of banks’ income diversification on their performance. Our findings suggest that banks should take into account the deposit interest rates and the variety of households’ investment habits when they operate toward diversification.

International diversification and firm performance: the moderating effects of corporate governance

In spite of plentiful research on the international diversificationperformance relationship, the link between the arrangement of governance systems and the performance of internationally diversified firms is underexplored. Drawing on complementary theoretical perspectives, this study examines the moderating effect of corporate governance on the relationship between international diversification and firm performance. The results show that firms experience superior performance in international diversification when they pay higher levels of managerial compensation, have a larger proportion of independent board members, and separate the roles of CEO and board chairman. This study contributes by showing that firms might alleviate challenges in managing international transactions, and thus improve the performance outcome of their foreign operations, through implementing better arrangements of corporate governance.

Corporate Diversification and Firm Performance: Evidence from Asian Hotel Industry

The unstable environment of hotel industry which is driven by the fluctuation of tourism demand has motivated this study to look into the best diversification strategy for firm performance betterment. 42 hotel firms are investigated across 4 Asian economies, from year 2001 to 2012. Our results suggest that unrelated industrial diversification is the only alternative to improve hotel firm performance. Unrelated international diversification instead has a significant negative effect towards firm performance. Our results further show that board of directors implies a significant link to the relationship between diversification and firm performance, only in a crisis period.

Organizational Learning and Corporate Diversification Performance

This study investigates the role of organizational learning on the valuation effects of corporate diversification. The empirical findings suggest that corporate diversification reduces shareholders’ wealth. However, consistent with the absorptive capacity viewpoint of organizational learning, diversification performance depends on repetitive and accumulative experiences, as captured by a firm’s prior diversification activity and/or a firm’s experience in operating in multiple-business segments. Specifically, single-business firms that diversify once demonstrate significant value reduction. In contrast, multi-business firms that diversify once do not demonstrate value reduction, while single/multi-business firms that diversify multiple times demonstrate material value creation. Findings also reveal that performance is conditional on the mode of diversification since internal growth diversification show higher valuation effects than diversifications through acquisitions. These findings contribute to the literature by affirming the importance of organizational learning, a cognitive and behavioral perspective, in explaining the valuation effect of corporate diversification.

Agro-Economic Performance of Crop Diversification in Rice Based Cropping Systems of Northwest Bangladesh

Among the winter (Rabi) crops, wheat is one of the most important temperature-sensitive crops and is the second most important grain crop after rice in Bangladesh. An experiment was conducted in research field of Wheat Research Centre, Bangladesh Agricultural Research Institute, Dinajpur, Bangladesh with 5 different cropping patterns including wheat and transplanted (T) Aman rice, and a non-wheat cropping pattern started from Rabi of 2008-09 to Kharif II of 2012 to evaluate the agronomic and economic performance of the patterns in the light soil of northwestern part of Bangladesh. Wheat-Jute-T.Aman Rice cropping pattern gave comparable gross margin with higher benefit-cost ratio (BCR) but need lower total variable cost. Lower gross return and gross margin were obtained from cropping pattern Wheat-T.Aus Rice-T.Aman Rice. Cropping pattern Wheat-Mungbean-T.Aman Rice produced higher gross return and gross margin than the cropping pattern Wheat-T.Aus Rice-T.Aman Rice. Cropping pattern Potato-Wheat-Maize-T.Aman Rice produced higher wheat equivalent yield in all the 4 years. Cropping pattern Wheat-T.Aus Rice-T.Aman Rice produced lower wheat equivalent yield than other cropping patterns and also induced acidity rapidly. Cropping pattern Wheat-Mungbean-T.Aman Rice needed lowest cost but gave economic benefit with comparable BCR.

International Diversification and Corporate Social Performance

This study investigates the differential effects of international diversification on two components of corporate social performance (CSP): input-based CSP and interaction-based CSP. Input-based CSP...