Construct validity of an objective (entropy) categorical measure of diversification strategy

This study measures the construct validity of an objective (entropy) approach to measurement of diversification strategy. Results indicate strong convergent, discriminant and criterion-related validity for the entropy measure of diversification. In particular, support for the entropy measure of diversification strategy was demonstrated through associations with the Rumelt subjective measure of diversification (convergent validity); size, debt and R&D intensity (discriminant validity); and accounting and market-based performance (criterion-related validity). Using structural equations modeling, the study reports strong standardized validity coefficients with a diversification factor (0.87 for the entropy and 0.94 for Rumelt's measures). The objective (SIC count) measure exhibits a low standardized validity coefficient (0.44) with the diversification factor. In a discriminant validity test, 70 percent of the variance in the entropy measure is unique to diversification while only 2.8 percent and 7.6 percent are unique to leverage and size, respectively. However, only 6.3 percent of the variance in the SIC count measure is unique to diversification. The study suggests that it may be more appropriate to use the diversification factor with both the entropy and Rumelt subjective measures for maximum accuracy (however, using either alone would be acceptable). Also, the results suggest that the SIC measure may be appropriate in more limited circumstances.     

On the measurement of corporate diversification strategy: Evidence from large U.S. service firms

Actual, not potential, relatedness determines the results of diversification strategies. An external examination of a firm's businesses, products, markets and technologies permits an assessment of potential relatedness among its various businesses. Potential relatedness is, however, often not realized. Also, relatedness may be externally invisible. Hence, actual relatedness may diverge from externally measured potential relatedness. This paper provides evidence suggesting that measures of corporate diversification strategy based on internal data differ significantly from those based on externally available data.     

Linking corporate strategy to capital structure: diversification strategy,type and source of financing

This study examines the relationship between corporate strategy and capital structure, specifically the diversfication and financing strategies of a firm. The results show that equity financing is preferred for related diversification and unrelated diversification is associated with debt financing. Additionally, firms diversifying through acquisitions are more likely to use public sources of financing and those emphasizing internal development of new businesses depend primarily on private sources of financing. Using simultaneous equation estimation, we found a reciprocal relationship between a firm's financial strategy and its corporate diversification strategy. Mode and nature of diversification are also reciprocally interrelated. © 1998 John Wiley & Sons, Ltd.     

The relationship between portfolio diversification and firm value: The evidence from corporate venture capital activity

Corporate venture capital (CVC) activity exposes firms to new technologies and markets. An important but as yet unexplored question is the relationship of the industry diversification profile of the portfolio of venture companies to corporate value creation. Insights from options and diversification perspectives support our hypothesis that diversification of a corporate investor's portfolio of venture companies is related to corporate wealth creation in a U‐shaped relationship. We also propose that a corporate investor's financial constraints moderate the relationship between the diversification profile of its CVC portfolio and value creation. When we tested our hypotheses using a sample of CVC investments across multiple industries, we found support for them, and these findings may inform the CVC activities of corporate investors. Copyright © 2013 John Wiley & Sons, Ltd.     

Construct validity of some unweighted product-count diversification measures

Construct validities are assessed for three simple-to-compute, unweighted, SIC-based continuous diversification measures and a recently proposed two-dimensional, SIC-based categorical diversification measure. Two of the three continuous measures are found to correspond strongly to Rumelt's categorical measures, suggesting that these two objective and easy-to-calculate measures are better suited for large sample, strategy research than has previously been assumed. No support is found for the two-dimensional measure.     

Research notes and communications corporate restructuring and strategic change: The effect on diversification strategy and R & D intensity

In the 1980s a number of large corporations restructured their diversified businesses through divestitures. It is hypothesized that restructuring activity focused on firms at intermediate levels of diversification (e.g., related-linked) which have a mixture of related and unrelated business units. Results confirm this hypothesis which explains that such mixed corporate strategies create organizational and control inefficiencies in managing both related and unrelated types of business units. Restructured firms were also found to move towards two types of different internal capital markets (related and unrelated). Most restructuring firms moved toward lower levels of diversification (e.g., related-constrained), although some moved toward higher levels of diversification (e.g., unrelated business). Also, this study finds restructuring firms that changed their corporate strategy by reducing diversified scope increased their R&D intensity. Firms that restructured and increased their diversified scope decreased R&D intensity. This result suggested a partial substitution between diversification and R&D activity.     

A resource-based approach to the multibusiness firm: Empirical analysis of portfolio interrelationships and corporate financial performance

The resource-based view of the firm has provided important new insights into corporate strategy (Barney, 1991; Peteraf, 1993); however, there has been only limited empirical research linked to the theory (e.g., Farjoun, 1994). Although a great deal of work has been done on Corporate diversification, the measures and data typically have a weak connection to resource-based theory. Empirical research on resource-based corporate strategy has been particularly dificult because key concepts such as tacit knowledge or capabilities resist direct measurement. This study is an effort to narrow the gap between theory and empirical research on the multibusiness firm. It develops a resource-based approach to modeling interrelationships among businesses and applies it to the analysis of corporate economic performance. This approach proves to be significant in explaining the financial performance of large manufacturing firms, and it promises to be an important source of insight into corporate strategy.     

The effects of leveraged buyouts on corporate growth and diversification in large firms

This study investigates the effects of LBOs on corporate growth and diversification in large U.S. firms which underwent leveraged buyouts during the 1980s. Based on the analysis, this study found that revenue and employee growth are significantly lower in LBO firms than in control firms that remained public. Strategically, we find that LBO firms decreased the size of both their periphery and core businesses more than public control firms and that LBO firms divested a significantly higher volume of periphery and core businesses than control firms. These postbuyout differences between LBO and public firms are consistent with the argument that LBO firms provide managers with incentives to downsize and prune lines of business, resulting in reduction in overall firm size and diversifcation.     

Agency theory and the influence of equity ownership structure on corporate diversification strategies

We articulate the agency theory view of managerial decision making and its implications for corporate diversification strategies. From agency theory, we generate testable predictions for the relation between equity ownership structure and diversification strategies and review the existing evidence on this relation. On balance, the evidence strongly supports the view that ownership structure influences corporate strategy. Copyright © 1999 John Wiley & Sons, Ltd.     

Demand‐side strategy,relational advantage,and partner‐driven corporate scope: The case for client‐led diversification

Research Summary: We advance research on corporate diversification by joining insights from the demand‐side and relational views in strategy to offer a novel theory of client‐led diversification. We propose that client‐led diversification results from a combination of the customer‐driven opportunities emphasized in the demand‐side view and the creation of added value through relational assets that is a central tenet of the relational view. Furthermore, we hypothesize that suppliers’ client‐specific knowledge, clients’ relational commitment to suppliers, and growth opportunities in clients’ markets (relative to the suppliers’ own markets) will magnify the client‐led diversification effect. We test our hypotheses using a longitudinal dataset on patent law firms and their diversification into new domains of patent prosecution work for their corporate clients. Managerial Summary: Explanations of why firms diversify into new lines of business have largely concerned the redeployment of underutilized resources, with little regard to opportunities or influences stemming from firms’ existing customers. In our article, we show how the changing scope of business needs from a knowledge‐based supplier firm's set of existing clients is a central driver of supplier‐firm diversification, and this is especially the case when the level of relational assets shared between a supplier and its clients is higher. In a competitive landscape where suppliers compete intensively for the business of clients, our results show how managers can increase the likelihood of capturing additional business from its existing exchange relationships rather than bearing the risks of seeking new exchange relationships.     

The relationship between product and international diversification: The role of experience

We establish prior diversification experience as a key determinant of the relationship between growth of product and international diversification. Prior diversification experience allows firms to overcome short‐run constraints on simultaneous diversification growth imposed by the difficulty to transfer tacit knowledge, ambiguous competencies, and limited absorptive capacity. Studying U.S. and European firms, we find a positive relationship between growth in product and international scope for firms with high and a negative one for those with little prior diversification experience. Further, we find that product diversification experience has greater impact than international diversification experience. Copyright © 2014 John Wiley & Sons, Ltd.     

HPLC法测定6-甲基尿嘧啶的含量及有关物质

建立了6-甲基尿嘧啶含量和有关物质的高效液相色谱测定方法。采用C18柱,检测波长为263 nm,流动相为甲醇-0.1 mol/L的醋酸铵(二者体积比为40∶60),流速为1.0 mL/min,进样量为20μL。样品检测质量浓度的线性范围为5～200μg/mL(r=0.999 9),平均回收率为99.42%(RSD值为0.51%)。该方法操作简便、快捷,结果准确、可靠,能有效用于产品的质量控制。     

Disruptiveness of innovations: measurement and an assessment of reliability and validity

Strategic management scholars have long explored the broad topic of innovation, a cornerstone in creating competitive advantage. Any attempt at theory construction in this area must encompass reliable and valid measures for key innovation characteristics. Yet, with respect to an important construct, i.e., disruptiveness of innovations, there has been relatively little academic research. Without formalizing the disruptiveness concept with a reliable and valid measure, it is difficult to conduct rigorous research to uncover the causes of the innovator's dilemma and identify mechanisms to help incumbents develop such innovations. In this paper, we develop a scale for the disruptiveness of innovations. We collected data from senior executives (vice president or general manager level) at 199 strategic business units (SBUs) in 38 Fortune 500 corporations and performed a series of analyses to establish the reliability and validity of the disruptiveness scale. The reliability measures, exploratory factor analysis, confirmatory factor analysis, and subsequent statistical tests strongly support our measure. Further, we also present nomological validity of the disruptiveness construct, thus establishing its predictive validity. Thus, this paper distinguishes the disruptiveness concept from other established innovation constructs, such as radicalness and competency destroying. Finally, we discuss the significance of our results and how this study might be useful to other researchers. Copyright © 2006 John Wiley & Sons, Ltd.     

Corporate elites and corporate strategy: how demographic preferences and structural position shape the scope of the firm

This study combines elements of the upper echelons and agency perspectives to resolve some of the ambiguity surrounding how corporate elites affect corporate strategy. We propose and test the notion that while differences in individual characteristics of corporate elites may imply different preferences for particular corporate strategies such as diversification and acquisitions, these basic preferences, when situated in different agency contexts (e.g., CEO, outsider director, non‐CEO top management team member), generate very different strategic outcomes. Our detailed empirical findings, based on extensive longitudinal governance and corporate strategy data from large U.S. corporations, also highlight the pitfalls of using aggregate units of analysis (e.g., board of directors or top management team) when studying the influence of corporate elites on corporate strategy. Copyright © 2004 John Wiley & Sons, Ltd.     

Dynamic capabilities as antecedents of the scope of related diversification: the case of small firm accountancy practices

We propose that differences in the scope of related diversification in firms can be accounted for by differences in their dynamic capabilities. In order to test this, we analyze 254 Norwegian small firm accountancy practices' possession of key dynamic capabilities including the heterogeneity of their human capital, their internal development routines, and their alliances with complementary service providers. We also analyze the influence of strategic choice, in terms of the positioning of the practice and its underlying strategic intent. While we observe no clear effects for these two latter factors, we find that dynamic capabilities have a distinct impact on the scope of services. Copyright © 2008 John Wiley & Sons, Ltd.     

Corporate diversification and the value of individual firms: A Bayesian approach

Research summary: Prior theory suggests that the performance effects of a firm's diversification strategy depend on a firm's individual resources and capabilities and the setting within which it is operating. However, prior tests of this theory have examined the average diversification‐performance relationship across all firms, instead of estimating the diversification‐performance relationship at the individual firm level. Efforts to estimate this average relationship are inconsistent with a central assumption of much of strategic management theory—that firms maximize value by choosing strategies that exploit their heterogeneous resources and individual situation. By adopting an approach that allows an evaluation of the diversification‐performance relationship for individual firms, this article shows that firms, both focused and diversified, tend to choose that diversification strategy—focus, related diversification, or unrelated diversification—that maximizes value. Managerial summary: Instead of a universal diversification discount or premium, this article shows that the effect of diversification on performance is heterogeneously distributed across firms and that firms tend to be rational in their diversification decisions. Copyright © 2015 John Wiley & Sons, Ltd.     

The effects of managerial ownership on international and business diversification: Balancing incentives and risks

Research has examined the effects of managerial share ownership on business diversification, typically from the incentive alignment perspective. Yet, share ownership also shifts risk to managers (the efficient managerial contracting perspective). Furthermore, the effects of managerial ownership on international diversification are unexplored. We examine how managerial ownership influences both international and business diversification in light of the trade‐off between incentive alignment and risk bearing. Based on the differing risk profiles of the two types of diversification, we argue that incentive contracts with higher levels of managerial ownership will be inefficient, i.e., counter to shareholder interests—reducing international diversification and increasing business diversification. Our findings support our arguments for international diversification. We find no significant effect for business diversification after accounting for endogeneity and serial correlation. Copyright © 2013 John Wiley & Sons, Ltd.     

Effects of intra- and inter-regional geographic diversification and product diversification on export performance: Evidence from the Chilean fresh fruit export sector

This study examines individually the effects of intra- and inter-regional geographic diversification on the export performance of firms from the Chilean fresh fruit sector. It also explores the direct effect of related product diversification on export performance and its role as a moderator in the relationship between geographic diversification and export performance. By employing panel trade data of 279 purely exporting firms over a six-years period (2010–2015), we found that both intra- and inter-regional diversification have an inverted U-shaped relationship with export performance, where moderate levels of diversification have positive effects on export performance, but higher levels may be counterproductive. Results also showed that related product diversification has a positive effect on firm export performance and a negative moderating effect on the relationship between inter-regional diversification and export performance. In the case of intra-regional diversification, we did not find any moderating effect from product diversification. By focusing on firms from the agricultural sector based in an emerging economy, this study offers practical implications for firm managers, trade organizations and private export associations, that may also be applicable to other export-based activities and emerging economies.     

The benefits of geographic sales diversification: How exporting facilitates capital investment

Many strategic investments require firms to make upfront outlays to generate profits at a later date. When firms have limited access to external capital, they have to rely on internally generated funds for these investments. In this case, their strategic investments are constrained by cash flow. I predict that by geographically diversifying sales (i.e., exporting), firms can relax this constraint because exporting signals more stable expected cash flows and firm quality, which can increase external capital providers' willingness to fund investments. Examining a representative sample of Spanish manufacturers from 1990 to 1998, I find support that exporting mitigates investment liquidity constraints allowing firms to make strategic investments they would not otherwise be able to make. This highlights how diversification can be a strategy to create and maintain competitive advantage. Copyright © 2011 John Wiley & Sons, Ltd.