Level Of Diversification Research Articles

Economic diversification as a factor of sustainable development: A case of Azerbaijan

In modern conditions, the one-sidedness in the economy of Azerbaijan makes it necessary to accelerate the diversification process of the country’s economy. From this point of view, the development of the non-oil sector in the country presents the main priority of the government’s economic policy in Azerbaijan. The purpose of the study is to investigate ways of ensuring the diversification of the national industries in Azerbaijan, which aims to move to a new economic growth model in modern conditions. The study analyzes the economy’s current state and export diversification level in Azerbaijan using the Herfindahl-Hirshman index. As a result of the analysis, the level of diversification in Azerbaijan’s economy and exports was found to be very low (in 2021, the Herfindahl-Hirshman index was 0.23 for the economy and 0.79 for exports). The findings indicate that cooperation between the state and business plays a significant role in increasing the diversification of the economy following the goals of sustainable development of Azerbaijan. On the other hand, it helps stimulate entrepreneurship development in the non-oil sector. One of the ways to solve existing problems in this area is to create Eximbanks to increase the country’s export capabilities of non-oil products. The study offers recommendations to speed up the process of diversification of the economy in Azerbaijan and increase its efficiency.

Degree of persistence of energy mix diversification of the US states: fresh evidence using LM unit root tests with sharp or smooth breaks and cross-sectional dependence.

Diversification of energy mix is related to the heterogeneity of contributions of energy sources in the energy consumption basket of nations. Its persistent degree reveals the efficiency of energy-related policies or shocks to diversify the contributions of energy sources in the energy mix. For the first time, the current study measures the diversification level of energy mix of the USA and its 51 states and examines its stochastic behavior to analyze its degree of persistence. To this end, we calculated the diversification of energy mix using Herfindahl-Hirschman index over the period 1960-2020. Then, we applied two novel versions of LM unit root tests that can incorporate sharp or smooth breaks and common factors (to control for cross-sectional dependence) to quantify the stochastic behavior of time series of Herfindahl-Hirschman index. Our results indicate (i) the energy mix of most of the US states diversified over the period. (ii) Most parts of diversification of energy mix occurred from mid of the 1970s to first half of the 1990s. (iii) Sharp breaks of deterministic part (intercept and slope of the linear trend) of Herfindahl-Hirschman indexes occurred coinciding with oil prices shocks in two decades 1970 and 1980. (iv) The Herfindahl-Hirschman index of most of states display stationary behavior, which indicate the pro-diversification policies, e.g., which are implemented to develop renewable energy sources, have transitory effects and policymakers should implement long-horizon policies to achieve their targeted level of diversification.

Export diversification and dependence on natural resources

Low export diversification is a risk-augmenting factor for many countries dependent on natural resources. The literature tends to focus on the growth effects of resource dependence (‘resource curse’ debate) while not much is known on how it affects the variety of non-resource exports. To quantify this effect we decompose the relative Theil index using product-level export data from 160 countries over the time period 1996–2018. We reveal that most (above 70%) of low export diversification level is driven by the limited variety of products other than natural resources. At the same time, natural resource dependence (in particular on fossil fuels) correlates negatively with the diversification of the non-resource portion of the export basket, in particular of technologically advanced products. Econometric estimates with interaction terms and case studies of countries that managed to escape the resource trap show that institutional quality determines the ability of resource exporters to diversify.

The effect of climate change and agricultural diversification on the total value of agricultural output of farm households in Sub-Saharan Africa

This study investigates the effect of temperature and precipitation on the economic value of agricultural output from farm households in six Sub-Saharan African countries: Ethiopia, Malawi, Niger, Nigeria, Tanzania and Uganda. Using a repeated cross-sectional dataset covering the period from 2008 to 2016, the study explores how the adverse effects of climate change vary among different levels of agricultural diversification. The findings reveal that a one-degree increase in temperature has a negative effect on the value of agricultural output. Nevertheless, households engaged in diversified production activities exhibit better adaptation to higher temperatures, leading to attenuated effects of climate change. Therefore, this study highlights the critical importance of diversification as a strategy to enhance the resilience of farm households in Sub-Saharan Africa.

The Diversification of the Economy of the Ulytau Region through the Development of Tourism

The purpose of the study is to determine the possibilities for diversifying the economy of the Ulytau region through the development of the tourism industry. Some regions of Kazakhstan are characterized by monoprofile regions, the problems of which are exacerbated during the crisis. A monoprofile characterizes the spatial organization of the economy of the Ulytau region as a consequence of the predominant orientation towards the development of non-ferrous metallurgy. As evidenced by the events of the world arena in recent years, excessive dependence on commodity markets in the long term, one way or another, creates a threat of inhibition and a deformation impact on the trajectory of the socio-economic development of the region. This condition determined the topic of this article and its theoretical and practical significance. The study uses a systematic approach. The methodological basis of the study is based on general scientific methods: analysis and synthesis of statistical data, logical method, method of comparative analysis, and methods for assessing the level of diversification of the regional economy. As a result of the study, a diagnosis of the state of diversification of the economy of the Ulytau region was carried out, and the tourism sector was defined as a direction for achieving the sustainability of the region’s economy due to the presence of rich tourism potential. Conclusions and suggestions based on the results of the study can be used in the development of regional programs and concepts for the development of the Ulytau region.

Position of services and trade in Аfrica and their impact on export diversification

The article provides a detailed assessment of the potential role of services in enhancing export diversification in Africa.In addition, the potential of SMEs (small and medium-sized businesses) in promoting the key role of services in the growth of production and competitiveness is assessed. The author also examines the key factors undermining the eff ectiveness of export diversifi cation and economic transformation in Africa. African exports continue to focus on a narrow range of commodities, but several African countries have achieved a certain level of export diversification over the past decade. The higher the level of development of the service sector, reflected by the variety and quality of services sold, the better the access of domestic firms to competitive key services. As a result, the author comes to the conclusion that traditional services, such as travel and transport, dominate the trade in services, covering more than two thirds of the total trade in services. Despite the importance of simplifying production and supply links, traditional services do not have a direct impact on the complexity and diversity of the export basket,which, as can be seen, increases due to services with high knowledge intensity, such as ICT. The development of trade in services promotes inclusive growth by reducing poverty and inequality and contributes to the achievement of the 2063 Agenda and the Sustainable Development Goals.

Inovação em modelos de negócios de start-ups brasileiras no setor educacional

Objective of the study: The aim of this article is to analyze how education technology start-ups in Brazil innovate their business models.Methodology: We conducted a multiple case study with 6 start-ups in the field of education, varying in terms of age, size and level of diversification. Our field surveys comprised interviews, observations and documents as data sources from 6 education sector start-ups. We used the extended case method as a guide for data analysis.Originality/relevance: This research contributes to a better understanding of how start-ups innovate in their business models.Main results: Among our main results, we found that in value creation, capabilities are developed in an informal and unstructured way. In value proposition, start-ups demonstrate considerable creativity in their offerings, but pay little attention to their channels and customer relations. In terms of value capture, they focus too much on the pursuit of revenue, but do not pay sufficient attention to cost control and pricing structure.Theoretical/methodological contributions: We collaborated with the scientific discussion on innovation in business models by discussing how 6 different start-ups innovate in their models.

The impact of farmland transfer participation on farmers' livelihood choices – an empirical study of the effectiveness of the 2014 Three Property Rights Separation reform

PurposeFarmland transfer choice is strongly associated with the livelihood strategies of rural households. The 2014 Three Property Rights Separation (TPRS) reform has legalized farmland transfer practices in rural China, hence stimulating the farmland transfer market at the national scale. This paper aims to determine the extent to which rural family livelihood strategies are influenced by their participation decision in farmland transfer practices. Further, the authors examined the effectiveness of the TPRS reform on the impact of farmland transfer participation on rural household livelihood strategy choices.Design/methodology/approachBased on the sustainable livelihood approach (SLA) using data from a national rural household survey, the authors employ the logit model and the propensity score matching (PSM) method to estimate the impact of household farmland transfer participation. Its interaction effects with household livelihood capital on their livelihood strategy choices and diversification level are also investigated. The difference-in-difference (DID) model is employed to assess the effectiveness of the TPRS reform.FindingsThe results indicate that the participation in transferred-out farmland could improve rural households' non-agricultural livelihood strategies. While the participation in transferred-in farmland could improve the probability of rural families' engaging in pure-agricultural (PA) or agricultural-dependent (AD) livelihood strategies, the TPRS reform can attract specialized farmers to increase their farm size through the market solutions and encourage small farmers to leave their farmland to engage in more off-farm work.Originality/valueThis study contributes to the literature on farmers' livelihood by exploring the role of farmland transfer decision and the effectiveness of 2014 TPRS reform through the SLA approach.

Improving the assessment of the diversification of construction companies

Abstract Various indicators are used to determine the level of company diversification. Their adequacy largely depends on the structure of the production programme. Its essential feature is the comparative weight of the main product in the total scope of the company’s work. In this situation, the intensity of the diversification process is reflected by the decrease in the volume of this product due to the inclusion of new products in the production programme. In this case, the adequacy of the diversification indicator can be reflected by comparing the scale of the main product with changes in the value of these indicators. The adequacy will be higher with more changes in the values of diversification indicators corresponding to changes in the volumes of the main product. Four indicators of corporate diversification are the most well-known and widely used: the Berry index, the entropy measure, Utton’s measure and the DG index. All of them have both strong and weak sides, so it is important to determine situations of the company’s production programme in which diversification indicators are appropriate to use, i.e., in which situations their adequacy is the greatest. The research has established that if the comparative weight of the main product of the production programme in the total scope of work is greater than 0.5, then the adequacy of the entropy measure and index DG is higher compared to the Berry index and Utton’s measure. If it is lower than 0.5, the other two diversification indicators should be used. The obtained results will help to more efficiently manage the process of diversification as a company’s development strategy.

Are Mediterranean Nonprofits Adopting the Social Enterprise Model?

The social enterprise model, which is characterized by economic, social, and governance dimensions, has become a key aspect of modern welfare states in Europe. Despite its potential to increase revenue diversification for nonprofits, particularly through commercial income, its effects in the context of Mediterranean countries within the European Union are untested. This study aims to examine the adoption of the social enterprise model by Mediterranean nonprofits. The results suggest that organizations with high levels of diversification through commercial income exhibit some characteristics of the social enterprise model, and this behavior is influenced by factors such as the type of promoter, user, organizational aims, and activities.

Community-based forest management promotes survival-led livelihood diversification among forest-fringe communities in Uganda

Livelihood diversification is a prominent feature of rural households in developing countries. It is a strategy commonly pursued by households to enhance their resilience to shocks and/or risks that affect their livelihood. While a common characteristic of Uganda’s community-based forest management (CBFM) is the promotion of alternative livelihood activities to reduce household reliance on natural forest resources from gazetted forests, it is unclear how livelihood diversification has been embraced by households engaged in CBFM. We explore livelihood diversification using cross-sectional survey data collected from 423 households in villages adjacent to Collaborative Forest Management (CFM) compartments and non-CFM compartments of Budongo Central Forest Reserve as well as two Community Forests (CF) in mid-western Uganda. We quantified the levels of diversification and fitted a Gini-Simpson Diversity Index as the response variable in two Tobit regression models to examine the determinants of livelihood diversification among forest-fringe communities in CFM and CF sites. Our results reveal high levels of survival-led household livelihood diversification in the area, with an average household engaging in five livelihood activities that were predominantly on-farm or involved the extraction of forest products for subsistence. In the CFM sites, livelihood diversification levels significantly increased with household heads’ duration of residence in the village and membership in other social groups in the village. In villages adjacent to the community forests, only the household dependency ratio positively influenced household livelihood diversification. Membership in forest conservation groups did not significantly predict the level of household livelihood diversification. Given the current survival-led diversification that these communities pursue, we recommended that development and conservation agencies in the area and other similar sites of CBFM deliberately enhance household access to high-return on-farm and non-farm livelihood activities to achieve meaningful transformations in rural livelihoods.

Portfolio Diversification and Financial Performance of Microfinance Institutions in Nairobi County, Kenya

Purpose: The current study sought to establish the effect of portfolio diversification on financial performance of microfinance institutions in Kenya. The study focused on establishing the effects of asset class diversification, risk profiling diversification, income diversification and locational diversification on performance of microfinance institutions in Kenya. The study was supported by Shiftability Theory, Capital Market Theory, Resource Based Theory and Balanced Score Card Theory. 
 Methodology: A descriptive research design was used and targeted 57 micro finance institutions operating in Nairobi County and registered under Association of Micro Finance Institutions. The unit of observation comprised of employees in top level management including chief financial officer, operational manager, and chief manager making a total of 171 respondents. The study employed a census approach. Both primary and secondary data were utilized in the study. Primary data was gathered using a five point Likert scale questionnaire while a secondary data collection sheet was utilized to collect secondary data from financial reports of the respective institutions. Both descriptive and inferential statistics was used to analyze the collected data. The statistics were generated through Statistical Package for Social Scientists and MS Excel.
 Findings: The results were displayed in form of tables. The study established that portfolio diversification comprising of asset class, risk profiling, and income diversification positively and significantly affect financial performance of the MFIs operating in Nairobi County as shown by respective beta values of 0.318, 0.288 and 0.498 and significant values of 0.000, 0.005 and 0.000. This bears the implications that enhancing aspects of each of the portfolio diversification contributes to improved financial performance of the institutions. Locational diversification on the other had had a positive but insignificant effect on financial performance of the MFIs (beta=0.103, sig=0.000>0.05) which implies that enhancing aspects of locational diversification contributes insignificantly to financial performance of the MFIs.
 Unique contribution to theory, practice and policy: The study provided recommendations to the management of the MFIs to enhance the levels of asset class diversification, risk profiling diversification, and income diversification since the practices bears positive and significant effect on financial performances of the MFIs.

Diversification strategies for the resilience of small New England dairies

Dairy farmers face persistent market shocks that force creative diversifications to enhance their resilience. In the summer of 2021, corporate dairy companies canceled over 100 contracts with organic dairy farmers in New England, a market shock to the industry across the Northeast. To better understand how farmers cope with market shocks in small dairy production, we studied small-scale dairy farms from the perspective of social ecological resilience, exploring the role of diversification in small dairies in Vermont and New Hampshire: which strategies are most effective, what factors influence diversification, and the barriers to diversification. Data came from interviews with dairy farmers and advocates from multiple sectors involving ecological, economic, institutional, cultural, and personal domains. We highlight why, how, and with what support small-scale New England dairy farmers have adapted, supplemented, or transformed their dairy operations. Dairy farms exhibited high levels of diversification, motivated by a range of economic, ecological, and personal incentives. Predominant diversification pathways include (1) higher premiums from organic or directly marketed liquid milk, (2) value-added dairy products, (3) nondairy farm products, and (4) efficient and sustainable land management practices. Our findings suggest that what supports diversification is the transparent and open sharing of knowledge among a network of farmers, based on strong interpersonal relationships. Institutions such as government programs and dairy cooperatives frame diversification, which is best supported by funding flexibility and accessibility of information. Diversification has enabled greater resilience for dairy farmers, despite continued dairy market volatility in the Northeast. Without structural and institutional changes, dairy viability will continue to be in jeopardy, and the need for diversification will remain.

Innovative Solutions to Increase Dietary Diversity of Rural Households

Today, it is becoming important to achieve food security in all countries. This article aims to find sustainable and innovative ways to improve household dietary diversity score (HDDS). Analyzes were carried out based on 320 small farms in the Samarkand region using cross-sectional data in 2021. T-test method were applied to find differences in dietary diversity and product diversification of households that prepared food with digital and other innovative patterns and those that did not use them. Culinary special television programs, radio broadcasts are assisted the households’ dietary diversity index increased by 2.7 points compared to those who did not follow the program, and the production diversification index showed an increase of 0.18 points in crop diversification and 0.20 points in livestock diversification with high statistical significance. When comparing production and consumption diversification between those who used and those who did not use digital technologies, the diversification index of the crop was 0.12 and livestock diversification was 0.24 points higher. In addition, we observed that HDDS was 2.2 times higher. In particular, those who constantly used Internet resources to learn culinary practices had a crop and livestock diversification 0.03 and 0.16 points higher, HDDS two times greater than those who did not use Internet resources. Therefore, only a small number of 11 respondents mentioned that they participated in culinary courses. Our study also found that the level of farm production diversification was higher with respondents who attended cooking courses than those who did not. It was scientifically proven that HDDS was twice as high as those who did not use online menu programs, and crop and livestock diversification index was 0.15 and 0.19 points higher, respectively. Findings indicated that, proposed innovative objective solutions displayed positive results in increasing the dietary diversity of rural households.

The Diversification Discount: Are Control Mechanisms Less Effective in Diversified Firms?

Purpose: This study investigates whether the market value discount experienced by multi-segment, (diversified) firms versus single-segment (focused) firms is associated with relative levels of internal and external governance. The goal is to shed light on the diversification discount by examining the role of internal and external control mechanisms.
 Methodology: Using a sample of single- and multi-segment firms over the period 1996-2015, we examine the relationship between firm value, the level of corporate diversification, and different levels of internal and control governance mechanisms. We use multivariate regression analysis to explore whether the effect of internal and external control on firm value varies across focused and diversified firms and whether strong external control substitutes for a lack of internal control.
 Findings: Our results indicate a negative correlation between firm value and the level of corporate diversification. Additionally, we find a positive correlation between firm value and the level of internal and external control mechanisms. However, the impact of these control mechanisms is significantly weaker in diversified firms.
 Unique Contributions to Theory, Policy and Practice: This study provides evidence that agency problems are more pronounced in diversified firms, and that weaker governance is associated with the diversification discount along three dimensions. Firstly, lower levels of internal control have a negative effect on firm value, and this impact is greater for diversified firms. Secondly, external control, as measured by institutional ownership and financial analysts' coverage, is positively related to the value of single-segment firms and, to a lesser extent, multi-segment firms. Lastly, strong external control substitutes for a lack of internal control in single-segment firms but not in diversified firms. This suggests that the role of institutional investors and financial analysts is more restricted under complex operational and informational structure.

Interregional interaction in the industrial sector of the economy: assessment methods and intensification factors

This article presents the results of a study of interregional interaction in the industrial sector of the economy of the Republic of Kazakhstan. The authors propose a methodical approach to assessing the interaction of regions through the cargo traffics of industrial goods. The most important parameters reflecting the intensity of interregional interaction are determined, and an index is proposed, on the basis of which it is possible to control both the level of interregional interaction in general and each parameter separately. The substantiation of the factors influencing the level and intensity of interregional economic interaction is given. Based on a comparative analysis of the structures of regional economic systems and cargo traffics of industrial goods in Kazakhstan, it was revealed that the highest intensity of interaction is observed between regions with a similar economic structure. At the same time, such indicators as the value of the gross regional product and the level of economic diversification do not significantly affect either the volume of interaction or the number of connections.

Does export structure enhance the growth gains from foreign investment? Evidence from the ECOWAS region

PurposeThis study aims to examine whether diversified economies enhance the growth benefits from foreign direct investment (FDI). Diversified economies benefit from stable export earnings, stable investment composition and greater factor endowments through forward and backward linkages that can leverage superior foreign technology embedded in FDI. This is crucial as many African economies suffer from dependency while FDI is concentrated in the primary sector.Design/methodology/approachThe authors use a dataset of 15 Economic Community of West African States from 1995 to 2020 and compile variables from various sources, including an export diversification index measured using the Herfindahl–Hirschman index of product concentration. The authors use a growth regression model estimated using dynamic panel estimators to control for endogeneity and simultaneity issues.FindingsThe results show that the effects of direct FDI are insignificant to growth considering diversification and controlling for other confounding factors. Meanwhile, diversification is associated with growth, which highlights the importance of industrial policy. More importantly, the authors find that the marginal effects of FDI are positively and significantly associated with growth when diversification levels are low, implying that production structure matters for the FDI–growth nexus in developing economies.Originality/valuePrevious studies have overlooked the role of export production structure on the FDI–growth nexus. Many developing economies are dependent on primary exports and suffer from dependency, which implies lower levels of factor endowments. As such, this reduces the growth gains from FDI. The authors provide new empirical evidence on the importance of export production structure on the FDI–growth nexus.

Export Product Concentration and Poverty Volatility in Developing Countries

ABSTRACT The present article has examined the poverty volatility effect of export product concentration using a panel dataset of 120 developing countries over the period of 1980 to 2014. Results, based on the feasible generalized least squares estimator, suggest that export product concentration tends to induce greater poverty volatility in low-income countries but reduces poverty volatility in relatively advanced developing countries. These outcomes reflect the fact that export product concentration reduces poverty volatility in countries that improve their manufactured export performance. Finally, the greater the level of export product diversification (or economic complexity), the higher the degree of poverty volatility reduction.

Global strategy collections: Multinationality and performance

AbstractResearch SummaryIn this second collection of articles relating to global strategy, we address the well‐established but unresolved issue of the relationship between multinationality and performance among multinational firms. The M‐P relationship has been the topic of many articles in many journals for many years, but its true nature is still not established. Both theory and empirical findings provide different and often opposed views, as can be seen in the articles collected here. We see two main perspectives on this issue. Some scholars suggest that differences in data and analytical tools have prevented consistent empirical results, and that more consistent and carefully chosen empirical modeling can yet establish the true M‐P connection. Others believe that basic problems in theory and in building testable frameworks that are truly consistent with theory have made this an inherently intractable problem. The collection provides important articles that test the M‐P relationship as well as critiques from both perspectives. We see considerable power in the view that individual firms are likely to have their own idiosyncratic optimal level of multinationaliation. We finish by calling for and suggesting new approaches to the issue, such as a micro‐foundations approach, as opposed to simply using more sophisticated tools to test problematic models based on well‐established but ultimately inadequate theory.Managerial SummaryThe relationship between the level of multinational diversification and performance in multinational firms is at the heart of global strategy. If operating at ever increasing levels in ever more countries does not provide reliably superior performance, why do firms continue to expand internationally? One view suggests that since firms continue to increase their international presence, there must be some ultimate benefits—difficult as they may be to establish. The opposing view suggests that since an equal amount of research finds no such benefits, it may be that no level of multinational diversification is generally optimal, but that depending on its particular resources and capabilities, experience, industry, and national portfolio, each multinational must discover its own optimal level of cross‐border investment.

Remember to Diversify Your Active Risk: Evidence from US Equity ETFs

In this article, the authors estimate the level of risk diversification for a universe of US equity exchange-traded funds (ETFs) and observe the benefits of diversification for the budgeting of active risk relative to a cap-weighted benchmark. They first introduce a risk model that needs only historical returns to break down relative risk into individual factor-related risk contributions, thus allowing for the construction of a measure of concentration directly inspired by the equally weighted risk contribution concept. They then use this concentration measure to highlight the impact of diversification on tracking-error stability and find conclusive empirical evidence that US equity ETFs that have a diversified set of systematic active risk contributions have a more stable tracking error (TE). These results suggest that investors seeking a stable TE for active risk–budgeting purposes may benefit from selecting ETFs with a strong level of risk diversification.