Diversification and diffusion: A social networks and institutional perspective |
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Authors: | Nan Zhou Andrew Delios |
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Institution: | 1. SKOLKOVO Institute for Emerging Market Studies, Moscow School of Management, Unit 1608, North Star Times Tower, No. 8 Beichendong Road, Chaoyang District, Beijing, 100101, China 2. Department of Strategy & Policy, National University of Singapore, Singapore, 117592, Singapore
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Abstract: | We examine the diffusion of a major firm strategy, unrelated diversification, among a population of Chinese listed firms during the 1991 to 2002 period. We propose that a firm??s social network can serve as both an information disseminator and a channel of influence in the diffusion of the diversification decision. Further, we investigate how the institutional environment alters the role of a network over time. We find that firms are more likely to diversify into conglomerates if (1) they occupy a central position in the network; (2) they have higher levels of government shareholding; and (3) the firms with which they have network ties diversify. Moreover, as the institutional environment strengthens over time, the influence of a firm??s network partners decreases. Consistent with these results, we contend that diversification is not only a response to economic and agency concerns, but also a function of the social and institutional context in which a firm is embedded. |
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