Diversification strategy and profitability

Prior work has shown an association between diversification strategy and profitability. This paper replicates that association using more recent and complete data and goes on to investigate the sources of the association. Theoretical arguments are advanced which predict the association which will remain once the effects of varying industry profitability are removed. Empirical tests verify this prediction and permit the discrimination between the effects of industry and diversification strategy on profitability.     

Diversification strategy and internationalization: Implications for mne performance

This study examines potential explanations for performance differences among multinational enterprises (MNEs). The research variables, diversification strategy and degree of internationalization, involve basic elements of firms' strategy: range and relatedness of products, and relative emphasis on foreign versus domestic operations. The sample included the 100 largest MNEs from the U.S. and Europe. Diversification strategy was significantly related to MNE performance, extending Rumelt's seminal research to international business. Degree of internationalization was also significantly related to MNE performance.     

Diversification strategy,profit performance and the entropy measure

Several industrial organization studies, using diversification index measures, examined corporate diversification and economic performance and failed to find any significant relationship between them. Rumelt and other strategy researchers used a semisubjective classification scheme and uncovered a systematic relationship between diversification strategies and performance. This study combines the strengths of the index approach, namely, simplicity, objectivity and replicability, with the essential richness of Rumelt's methodology. Using the Jacquemin-Berry entropy measure of diversification and the line-of-business data, this study finds that firms with predominantly related diversification show significantly better profit growth than firms with predominantly unrelated diversification.     

Corporate economic performance: Diversification strategy versus market structure

This paper incorporates both diversification strategy and market structure variables in a study of corporate economic performance. A subsample of 128 firms from Rumelt's 1974 study was updated and utilized to investigate the possibility that market structure variables might moderate or confound the diversification/performance relationship he reported. Study results indicate that performance differences could be demonstrated for some of Rumelt's categories, but, across the range of categories, a hypothesis of performance differences was rejected. As expected, categories associated with distinctly high or distinctly low economic performance were also associated with significant differences in a series of market structure variables.     

多元化经营与多元化折价--企业多元化研究的新进展

对多元化经营的讨论是传统金融学的一个重要议题。一致的共识是多元化经营会损害企业价值，多元化企业存在着多元化折价；而且大量的实证研究也具体度量了多元化折价程度。而近期对多元化经营的研究却从不同的侧面对上述结论提出了置疑。本文在总结了国外对企业多元化最新研究的基础上，认为对多元化折价的置疑本身仍存在诸多问题，因此，不能仅凭相对少量的研究结论就轻易否认多元化折价的存在。     

Diversification and market performance

Review of Industrial Organization - Recent theoretical research indicates that diversification may affect industry profitability for reasons (e.g., improved efficiency and increased entry) other...     

International Diversification, Industrial Diversification and Firm Performance of Hong Kong MNCs

Although multinational corporations (MNCs) are not new to business research, Asian MNCs and their performance have yet to be widely studied. This study investigates the relationship between international diversification, industrial diversification and firm performance of MNCs from Hong Kong. In contrast to previous findings, the results show that Hong Kong MNCs are more internationally diversified, but not performed better, than domestic firms. Also, among Hong Kong MNCs, international diversification has a positive impact on profitability and sales growth, but not on the profitability. Industrial diversification also enhances profitability stability but reduces profitability significantly. Neither the hypothesized inverted U-shaped relationship between international diversification and performance nor the interaction effect from both international and industrial diversification strategies on performance can be validated. Implications are discussed with reference to the local context.     

Diversification through licensing

In this paper the author examines the appropriateness of taking a licence agreement to implement four different types of strategy for product diversification. The research is based on interviews with managers of more than 40 companies manufacturing more than 70 products under licence in Canada and the UK. The result is a guide to the effective use of licence agreements from the point of view of the buyer. The central question addressed is ‘under what conditions should a firm take up a licence agreement?’     

企业核心能力与多元化经营

一、企业核心能力的内涵与特点根据帕汉拉德和哈默的定义 ,核心能力是“组织中的积累性学识 ,特别是关于如何协调不同的生产技能和有机结合多种技术流的学识” ;是“一组先进技术和谐组合” (这里提到的技术不是一般意义上的科学技术 ,它既包括科学技术 ,又包括管理、组织以及营销等方面的技能 ;也不是一两个单项技术 ,而是以一定方式结合在一起的技术群体 ) ;是企业开发独特产品、发展独特技术和发明独特营销手段的能力。它以企业的技术能力为核心 ,通过企业战略决策、生产制造、市场营销、内部组织协调管理的交互作用而获得使企业保持持续…     

Diversification,restructuring and economic performance

During the 198Os, many conglomerates and other diversified firms reduced their diversification by refocusing on their core businesses. This paper provides an economic explanation for this phenomenon and empirically tests the hypotheses that emerge from the analysis. It is shown that refocusing is associated ex post with Profitability improvements.     

电网投资的多元化

多数进行电力改革的国家，都将电网产权结构、运营管理方式作为改革的重要组成部分，在建立开放的电力市场过程中，实现输电通道的开放。2002年，国务院在电力体制改革方案中明确，区域电网公司、一县范围内营业区交叉的多家供电企业要改组为有限责任公司或股份有限公司。这是我国正式放开电网投资的明确信号。电网产权结构现状1.国家电力公司拥有绝大部分省网资产和跨区电网资产。包括全部跨大区电网，除广东、海南、西藏、江苏北部、内蒙西部等省区以外的省网，几乎全部县以上城市的城网和三分之二以上的县属农村电网资产。2.在广东、海南…     

The Firm Size Distribution and Inter-Industry Diversification

We show that the stylized facts of the Firm Size Distribution (FSD) by age cohorts, as shown in Cabral and Mata (2003), bind within 4-digit manufacturing industries in the UK and Belgium. This paper investigates whether the time to build a portfolio of products from inter-industry diversification is a mechanism that helps explain the stylized facts of the FSD by age cohorts. We find that the degree of inter-industry diversification has a separate impact on firm size when controlling for age, amongst other factors. Using the techniques of Cabral and Mata, we find that inter-industry diversification does shift the FSD to the right, and more so in older age groups.     

Labour Market Dualism and Diversification in Japan

The Japanese labour market has been regarded as ‘dualistic’ in terms of employment status (regular vs non‐regular). While it is true, this perspective misses recent changes in regular employment in terms of labour flexibility. The government has attempted labour market deregulation since the 1990s to increase the flexibility of not only non‐regular but also regular employment, and the labour market has become more diversified. Labour unions lack power resources to resist these neoliberal changes, however, because of their insufficient access to policy‐making, low union density and a lack of solidarity against the background of economic stagnation and competition under globalization.     

Diversification and intervalling effects on stock returns

Diversification and intervalling effects on stock markets have been studied separately in the literature. This paper studies empirically the interaction of these two joint effects on five international stock markets. The diversification benefits may depend on the length of the holding interval because the covariance between two stock indexes may not change proportionally with the individual stock indexes' variances when the holding interval varies. The empirical results show that the degree of diversification benefit varies with the length of the holding interval. The greatest gain occurs with the shortest holding interval while the degree of risk reduction decreases with an increase in the holding interval in general.     

Accounting variables as determinants of systematic risk in Malaysian common stocks

The objective of this paper is to examine the relationship between financial accounting variables and systematic securities risk in a small and developing capital market, namely the Kuala Lumpur Stock Exchange. Factor analysis was used to group and identify the financial variables into independent dimensions. The possible bias due to multicollinearity between accounting data was ameliorated by selecting one representative variable from each factor profile of the firm. Evidence has shown that financial ratios/profitability ratio and, to a certain extent, activity ratio are important determinants of the systematic risk of a common stock. Contrary to most of the reported findings in other markets, the results show a negative relationship between leverage ratio and systematic risk, for which we have no explanation.     

Diversification strategy,capital structure,and the Asian financial crisis (1997–1998): evidence from Singapore firms

We use agency theory to predict the influence of related and unrelated product diversification on a firm's level of debt financing. Further, we argue that the link between diversification and capital structure is moderated by the environment in which firms operate. Using SAS PROC MIXED, we fit a mixed‐effects model to our unique six‐year longitudinal dataset (1995–2000) of 245 publicly listed Singapore firms. Our data spans the period of the Asian Financial Crisis (1997–1998). We find that firms pursuing unrelated product diversification take on less debt financing in stable environments, but more debt financing in dynamic environments. Using longitudinal structural equation modeling, we find a reciprocal relationship between a firm's product diversification strategy and its debt financing level. Copyright © 2009 John Wiley & Sons, Ltd.     

Diversification: The growing confusion

Over the years the concepts of diversification have been simplified and a system of shorthand has developed for discussing the issues surrounding the strategy. Because of this a confusion in terminology has developed and sight of the fundamental principles involved has been lost within the vagaries of fashion. Selection of a particular strategy ought to be based on the clear identification of the benefits that the strategy will offer. Those benefits should be used to help solve specific problems. Only by returning to this type of thinking can the legitimacy of diversification be revived and the alternating acclamation and denunciation of the strategy be overcome.     

Diversification strategies,business cycles and economic performance

Two major diversification strategies of firms are examined: diversification into related businesses and diversification into unrelated businesses. The first strategy attempts to exploit operating synergies. In the second, the firm attempts to gain financial benefits from its ability to increase leverage due to a greater stability of cash flows. The study utilizes a large sample affirms to assess empirically the benefits and costs of these two diversification strategies by developing a new measure of diversification across business cycles and economic sectors. This new measure is compared with Berry—Herfindahl type measures of total diversification and recent measures of diversification into related businesses. The results indicate that pure financial diversification is associated with (a) more stable cash flows, i.e. lower operating risk; (b) increased levels of leverage; and (c) lower profitability. These observations are in accord with the theory. We also reaffirm that firms which diversify into related businesses have, on the average, higher profitability than non-diversified firms, although these results are not always statistically significant.