Relationships among industry environment, diversification motivations and corporate performance

Tan, Bertram; Chang, Hae‐Ching; Lee, Chen‐Kuo

doi:10.1108/10569210710844390

Cited by 18 publications

(14 citation statements)

References 48 publications

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“…To support this, in May 2008, the Cross Border Investment Division was introduced under the Malaysian Industrial Development Authority (MIDA). diversification theory (Qian, 1996;Tan et al, 2007). MNCs are able to diversify risk better, allowing them to undertake higher risk, but with a higher return on investment.…”

Section: Introductionmentioning

confidence: 99%

International diversification and firm’s value: evidence from developing nations

Bany‐Ariffin

Matemilola

Wahid

et al. 2016

RIBS

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Purpose This paper aims to evaluate the impact of international diversification, through the investment abroad activities of the Malaysian multinational corporations (MNCs), on their financial performance. Design/methodology/approach The paper applies the panel generalized method of moments (GMM) estimation technique that gives better results. Findings The empirical findings show that the move to invest abroad has brought a positive impact on Malaysian MNCs’ financial performance. However, in terms of a firm’s risk, the results contradict the general internationalization-risk hypothesis. Research limitations/implications The study focuses on the top 100 multinational firms; future researchers may extend the time period and use the entire sample of all the multinational firms. Practical implications Foreign investments offer rewarding returns due to cheaper labour and raw materials, competitive edge in terms of technological advancement and larger market opportunities. Originality/value The paper contributes to the literature using the panel GMM’s estimation that effectively control for reverse causality and serial correlation problem. The paper also contributes to the international diversification and performance relationship, in a fast-growing Malaysia.

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Section: Introductionmentioning

confidence: 99%

International diversification and firm’s value: evidence from developing nations

Bany‐Ariffin

Matemilola

Wahid

et al. 2016

RIBS

View full text Add to dashboard Cite

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“…Rather it is seen that as the strategies of diversification ascend to higher levels, that is, from Single Business to Dominant Business to Related Business, the negativity in relationship between diversification strategy and dependent variables becomes more vivid and significant. Even the past research shows mixed results between diversification and performance, as Rhoades (1973), Nathanson andCassano (1982), Nyugen et al, (1990), Farjoun (1998), Tan et al, (2007), show positive association between diversification and performance while Hall (1995), Rogers (2001), George and Kabir (2005), show negative relationship between the two variables. However, Bettis and Hall (1982), , Delios and Beamish (1999) showed no relationship between the strategy of diversification and performance.…”

Section: Discussionmentioning

confidence: 98%

Diversification Strategy and Corporate Performance in India: An Empirical Investigation

Mohindru

Chander

2010

Asia Pacific Business Review

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Diversification is developing as one of the most important growth strategies these days followed by the corporate sector. Using multiple regression analysis, this paper studies the impact of diversification on the performance of firms in the Indian corporate sector over the ten year time period, that is, 1995–2004. Profitability is measured in terms of Return on Net Worth (RONW), Return on Capital Employed (ROCE) and Earnings Per Share (EPS), while growth is measured in term of Growth in Sales (GSALES) and Growth in Dividend (GDIV). But for diversification, nine other independent variables have been controlled for. The results show that diversification strategy, especially Related Business strategy, has a negative and significant impact on the performance of the firms. Risk and industry have a positive and significant association with most of the dependent variables, while age and leverage have a negative and significant association with most of the dependent variables. Firms in India need to achieve the Break-even Point with respect to their costs of diversification. After the gestation period is over, diversification strategy is likely to bear fruitful results for the firms in India.

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“…Next, concerning product diversification measurement, certain scholars (Pandya & Rao, 1998;Tan, Chang, & Lee, 2007) measured this strategy using Rumelt's (1974) diversification classes, while others depended on using continuous measures such as Diversification Entropy Measure (David, O'Brien, Yoshikawa, & Delios, 2010;Singh, Mathur, Gleason, & Etebari, 2001) or Herfindahl Index (Çolak, 2010;Fukui & Ushijima, 2006). The use of different measurement methodologies for geographic diversification such as foreign sales ratio (Capar & Kotabe, 2003;Geringer, Beamish, & daCosta, 1989), geographic entropy measure (Hitt et al, 1997), along with many others have also been frequently observed in the history of literature on the field.…”

Section: A Comment On Methodologiesmentioning

confidence: 99%

Significance of Studying Product Diversification, Geographic Diversification, and Their Interaction Impacts for Malaysian Companies: A Literature Review

Hilman¹

2015

ASS

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The objective of this study was to comprehensively and critically review research literature on impacts of product diversification strategy and geographic diversification strategy, conducted particularly in Asian context, and set forth guidelines for future studies. The study concludes that past research into impacts of product diversification and geographic diversification produced indecisive results. There has also been absence of any consensus on the interaction impacts of the two strategies on corporate performance. Although past research studied the topic using variety of methodologies but there has been limited research on the topic for Asian economies compared to Western ones. This is especially true about Malaysian public listed companies (PLCs) for which, particularly, studies regarding interaction impacts of the two strategies are extremely limited. For Malaysia, the challenging business scenario in future coupled with quite significant number of diversified companies warrant research into these areas. Future research could take up the objective of analysing and understanding individual and interaction impacts of product diversification and geographic diversification on corporate performance of Malaysian companies and contribute significantly to this research field. It could adopt new and advanced methodologies for measuring diversification strategies as well as employ several measures of corporate performance to produce comprehensive and robust results. Findings of such research would certainly be useful for practicing managers, particularly Malaysian strategists, and guide them in their decisions concerning diversification strategies and help them better manage their companies' performance.

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Relationships among industry environment, diversification motivations and corporate performance

Cited by 18 publications

References 48 publications

International diversification and firm’s value: evidence from developing nations

International diversification and firm’s value: evidence from developing nations

Diversification Strategy and Corporate Performance in India: An Empirical Investigation

Significance of Studying Product Diversification, Geographic Diversification, and Their Interaction Impacts for Malaysian Companies: A Literature Review

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