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Article
Publication date: 21 March 2019

Shan-Huei Wang, Chung-Jen Chen, Andy Ruey-Shan Guo and Ya-Hui Lin

The purpose of this paper is to examine the relationships among choice of industry diversification, capabilities and business group performance, as well as to point out…

Abstract

Purpose

The purpose of this paper is to examine the relationships among choice of industry diversification, capabilities and business group performance, as well as to point out the potential concern about endogenous role of industry diversification.

Design/methodology/approach

Using data from the top 100 business groups in Taiwan from TEJ database. This study uses Heckman’s two-step estimation procedure and contingency model to achieve unbiased results and examine our hypotheses.

Findings

The results of this study find that if business groups’ marketing or operational capabilities are strong they should adopt a high level of diversification strategy and if business groups’ R&D capability is strong they should adopt a low level one. The results of this study also show that the endogenous problem of industry diversification exists, and needs to be considered. Moreover, our finding confirms the importance of capability–strategy fit, which, in turn, can achieve better performance.

Practical implications

On average, high industry diversification groups perform better than low industry diversification groups after controlling for endogeneity issues. Business groups can achieve better performance if their strategy choices match the capabilities they encounter. Managers should pay attention to strategy-capability fit issues. Specifically, they should review their organizational capabilities as well as check their strategies within firms.

Originality/value

This study is one of the first that attempts to explore the endogenous role of diversification strategy choices, and empirical examine strategy-capability fit on business group performance.

Details

Management Decision, vol. 58 no. 1
Type: Research Article
ISSN: 0025-1747

Keywords

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Article
Publication date: 6 July 2010

Mohammad Pakneiat, Monireh Panahi and Javad Noori

The literature on large firms in developing countries proposes a link between types of capabilities and diversification pattern. It is argued that…

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5293

Abstract

Purpose

The literature on large firms in developing countries proposes a link between types of capabilities and diversification pattern. It is argued that technological/organizational capabilities lead to related diversification, and by using contact/general capabilities firms (mostly in developing countries) are able to diversify into unrelated fields. However, in our case, despite the presence of contact/general capabilities, only related diversification is observed. Limitation of the scope of diversification does not allow them to invest in different lucrative businesses. Most successful firms in developing countries have diversified vastly.

Design/methodology/approach

To determine out the reason for this behavior in this case, in‐depth interviews based on open‐ended semi‐structured questionnaire with key 12 decision‐makers were carried out. Each interview took about 90 minutes.

Findings

The case study showed that firms' approach to mission development is connected to firm diversification and capabilities. A mission developed based on a strategic approach leads to the development of technological/organizational capabilities, which make related diversification more likely. However, a mission developed based on a philosophical approach when added to firm contact/general capabilities encourages unrelated diversification.

Research limitations/implications

The research takes for granted the role of national conditions (e.g. macroeconomic indexes) when it is argueed that the behavior of Khodro is expected to be similar to firms in other developing countries (or formerly developing countries, e.g. South Korea). The work presented here could be tested again in two or more firms in a similar environment.

Practical implications

The paper's findings should help firms in developing countries to develop their mission statement in a way that allows them to grow faster via unrelated diversification. It also informs them about the limitations of a strategic approach to their mission that hinders them from leveraging their contact and general capabilities.

Originality/value

Previous research has not paid enough attention to managerial issues in firms in developing countries. Firms in developing countries need more context‐specific instructions to succeed.

Details

Business Strategy Series, vol. 11 no. 4
Type: Research Article
ISSN: 1751-5637

Keywords

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Article
Publication date: 18 October 2011

Heng‐Yih Liu and Chia‐Wen Hsu

The main purpose of this paper is to introduce a comprehensive model explaining what affects the scope of the firm and also to find out its impact on firm performance.

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3181

Abstract

Purpose

The main purpose of this paper is to introduce a comprehensive model explaining what affects the scope of the firm and also to find out its impact on firm performance.

Design/methodology/approach

This paper is based on an empirical analysis of a sample of 312 hardware manufacturing companies in Taiwan.

Findings

The research findings indicate that capability exploitation and upgrading will exert a positive influence on corporate diversification. In addition, corporate diversification will exhibit a curvilinear effect on firm performance.

Practical implications

Under the logic of capability‐based growth, managers should manage portfolios of capability upgrading and capability exploitation; and then, managers have to conduct econometric analyses to find out a firm's optimal level of corporate diversification for performance maximization.

Originality/value

This study attempts to propose a dynamic capabilities perspective, which suggests that the successful growth of a firm hinges on a strategic logic of capability‐based growth management containing both capability exploitation and capability upgrading, for exploring the antecedents and consequences of corporate diversification.

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Article
Publication date: 22 March 2019

Hueiting Tsai, Shengce Ren and Andreas B. Eisingerich

The purpose of this paper is to theorize and empirically examine the effects of intra- and inter-regional geographic diversification on firm performance in China…

Abstract

Purpose

The purpose of this paper is to theorize and empirically examine the effects of intra- and inter-regional geographic diversification on firm performance in China. Furthermore, it investigates they key firm capabilities, which moderate the relationships between intra- and inter-regional geographic diversification and firm performance.

Design/methodology/approach

In this research, the authors studied 366 listed companies that invest in mainland China. The authors used the Taiwan Economy Journal database to construct a panel data set from 2005 to 2014 and employed panel regression estimations as part of the empirical analyses.

Findings

The authors find that the effect of regional diversification on firm performance is significantly influenced by the contexts of the expansion. More specifically, the results show that the effect of intra-regional geographic diversification on firm performance takes the form of a U-shape relationship. In contrast, the authors find that inter-regional geographic diversification has a negative effect on firm performance. Firm marketing, research and development (R&D) and managerial capabilities moderate these relationships.

Research limitations/implications

First, the companies studied in this research are mainly Taiwanese manufacturers with investments in mainland China. Second, the current model can be expanded by exploring additional process explanations and moderators in future research.

Practical implications

An important practical implication of this research is that when firms choose an intra-regional expansion strategy in China, they should adopt a moderate provincial diversification strategy in the invested region and reinforce its marketing capability to enhance firm performance. A careful consideration of a firm’s marketing, R&D and managerial capabilities is needed for successful regional diversification strategies in the China market.

Originality/value

The findings of this study contribute significantly to the existing literature on firms’ regional diversification. First, the authors explore and empirically test intra- and inter-regional geographic diversification strategies in China. The authors find that the effect of regional diversification on firm performance varies according to the contexts of the expansion (for instance, global, regional, in a single country). Second, this study furthers the research theme of intra- and inter-regional diversification by introducing and investigating previously unexplored firm capabilities as part of the framework.

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Article
Publication date: 29 April 2008

Stephen K. Callaway

The aim of this paper is to investigate how e‐commerce may influence international and product diversification.

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1644

Abstract

Purpose

The aim of this paper is to investigate how e‐commerce may influence international and product diversification.

Design/methodology/approach

The current study elaborates the importance of resource‐based and resource dependence theory to illustrate how internal and external resources may enable firms to diversify. Prior studies on resource‐based theory, resource dependence theory, international diversification, product diversification, and IT capabilities have been presented to show gaps in the literature and identify avenues for future research.

Findings

This paper has established a theoretical perspective on the importance of external resources or infrastructure, as well as firm‐specific capabilities, on encouraging product and international diversification. A model has been developed and propositions given.

Research limitations/implications

Future studies on this topic will need to empirically test the model given in this paper, in order to manage all of the interconnected variables and mediators developed in this study.

Practical implications

Utilization of the internet may provide a means for firms to offer “one‐stop shopping” for customers, and may even encourage firms to diversify internationally. Furthermore, important firm‐specific IT capabilities of financial services firms may be extended geographically and by product line, and combined with utilization of the internet, may improve firm performance.

Originality/value

This study compares and contrasts the role of internal and external resources, and assesses whether they will demonstrate a greater effect upon international or product diversification.

Details

International Journal of Commerce and Management, vol. 18 no. 1
Type: Research Article
ISSN: 1056-9219

Keywords

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Article
Publication date: 4 July 2016

Margaret Tallott and Rachel Hilliard

– The purpose of this paper is to examine the development process of dynamic capabilities.

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1657

Abstract

Purpose

The purpose of this paper is to examine the development process of dynamic capabilities.

Design/methodology/approach

The paper adopts a qualitative, longitudinal participant-observation research design. A single case study firm was observed over a ten-year period of active researcher engagement allowing for the collection of rich data on the development and deployment of dynamic capabilities as they evolved.

Findings

Dynamic capabilities can be identified as sensing, seizing and transforming. They are capable of intentional development by managers through strategic decision making and deliberative learning, within a path-dependent evolution.

Research limitations/implications

A longitudinal single case study allowed for a close look at the development of dynamic capabilities, exploring the context and conditions that facilitated change and tracing the evolution of the organization’s processes. However, this study remains subject to the limits of a single case approach. Future cross-sectional research would be able to test the conceptual model and allow for generalization of the findings to other populations of firms.

Practical implications

The dynamic capability concept has been criticized for being of little practical use to managers. This research shows the process of intentional dynamic capability development, offering insights to practicing managers.

Originality/value

This research adds to the relatively scant base of empirical work on dynamic capabilities and offers a conceptual model of dynamic capability development. The paper contributes to the neglected area of dynamic capabilities in SME’s, showing that the dynamic capability concept is relevant to this sector. The paper provides insight for practitioners by showing that intentional dynamic capability development is achievable.

Details

Baltic Journal of Management, vol. 11 no. 3
Type: Research Article
ISSN: 1746-5265

Keywords

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Article
Publication date: 27 May 2014

Nicholas Theodorakopoulos, Carmel McGowan, David Bennett, Nada Kakabadse and Catarina Figueira

The purpose of this paper is to demonstrate analytically how entrepreneurial action as learning relating to diversifying into technical clothing – i.e. a high-value…

Abstract

Purpose

The purpose of this paper is to demonstrate analytically how entrepreneurial action as learning relating to diversifying into technical clothing – i.e. a high-value manufacturing sector – can take place. This is particularly relevant to recent discussion and debate in academic and policy-making circles concerning the survival of the clothing manufacture industry in developed industrialised countries.

Design/methodology/approach

Using situated learning theory (SLT) as the major analytical lens, this case study examines an episode of entrepreneurial action relating to diversification into a high-value manufacturing sector. It is considered on instrumentality grounds, revealing wider tendencies in the management of knowledge and capabilities requisite for effective entrepreneurial action of this kind.

Findings

Boundary events, brokers, boundary objects, membership structures and inclusive participation that addresses power asymmetries are found to be crucial organisational design elements, enabling the development of inter- and intracommunal capacities. These together constitute a dynamic learning capability, which underpins entrepreneurial action, such as diversification into high-value manufacturing sectors.

Originality/value

Through a refinement of SLT in the context of entrepreneurial action, the paper contributes to an advancement of a substantive theory of managing technological knowledge and capabilities for effective diversification into high-value manufacturing sectors.

Details

Journal of Manufacturing Technology Management, vol. 25 no. 5
Type: Research Article
ISSN: 1741-038X

Keywords

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Article
Publication date: 19 June 2020

Yi Xie, Yan Meng, Jie Xiong, Lu Xu and Jie Yan

Environmental non-governmental organizations (ENGOs), one of the major forces in environmental protection, have developed rapidly in the past few years, especially in…

Abstract

Purpose

Environmental non-governmental organizations (ENGOs), one of the major forces in environmental protection, have developed rapidly in the past few years, especially in developing countries such as China. This paper aims to reveal how the ENGOs select their focuses, specifically if they only concentrate on one focus or on contexts in which they obtain various focuses and the motivations behind their choosing strategies.

Design/methodology/approach

The current research interviewed 103 leaders of ENGOs covering every province in mainland China and adopts existing theories of NGOs alongside diversification strategy from a management perspective.

Findings

The results showed that most Chinese ENGOs now tend to be diversified but face different challenges. This research highlights the importance of ENGOs’ resources and capacities in facing current challenges and suggests directions to improve their diversification strategy.

Originality/value

This research adds value to the research of environmental NGOs and gives suggestions to environmental NGO practitioners, in particular to those in emerging markets.

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Case study
Publication date: 3 June 2016

Rita Dubey

General management/strategy.

Abstract

Subject area

General management/strategy.

Case overview

Case B: On April 4, 2013, the meeting of GMR’s Group Executive Council (GEC) was scheduled to take place. Srinivas Bommidala, G.M. Rao’s son-in-law and Chairman of GMR’s airports business, was gearing up for the meeting. The meeting was called to discuss a proposal for bidding for an upcoming airport project in the Philippines. It had been more than a decade since GMR entered the airport infrastructure sector. The organization had built substantial airport operating expertise during that period. It adopted a joint venture (JV) model for expanding into the airport infrastructure business. Until now the organization had always formed JVs for all its airport projects. JVs, with existing airport operators, were necessitated by the bid conditions that required a certain minimum airport operating experience for qualifying as a bidder for various projects. In some cases, JV with a local player helped GMR with market knowledge for functioning in a foreign market. GMR also used JVs to access the capabilities it lacked for operating in this sector and gradually learnt from its partners for building capabilities in-house. The group now had the required operating expertise in the sector to qualify as a bidder. One of the key issues the GEC was contemplating was: Whether GMR should continue to form JV for bidding for the upcoming project or should it go solo? Further, if it had to form a JV then, in which areas should it seek a partner?

Expected learning outcomes

Case B: To help students understand how companies use alliances as growth strategies; to understand the rationale for formation of various alliances; to explore various factors managers consider when deciding on alliance strategy of an organization; to understand the challenges associated with using alliances as a strategic option; and to understand the pros and cons of internal development (i.e. going solo) vis-à-vis strategic alliances.

Supplementary materials

Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

Subject code

CSS 11: Strategy.

Details

Emerald Emerging Markets Case Studies, vol. 6 no. 1
Type: Case Study
ISSN: 2045-0621

Keywords

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Book part
Publication date: 3 October 2006

Tim R. Holcomb, R. Michael Holmes and Michael A. Hitt

Research on diversification has produced insights into possible linkages between organizational scale and scope and firm performance. However, the paucity of research on…

Abstract

Research on diversification has produced insights into possible linkages between organizational scale and scope and firm performance. However, the paucity of research on strategy implementation has hindered our understanding of the broader performance implications of diversification. We extend the resource-based view and diversification research by examining how firms can exploit diversifying investments designed to achieve scale and scope economies. Successful firms more effectively structure their resource portfolio, bundle resources into capabilities, and leverage these capabilities when implementing a diversification strategy. We develop a model linking strategies by which firms expand product and geographic market scope to the actions they take to manage resources. We examine three actions – internal development, acquisitions, and strategic alliances – and discuss the implications of these actions using the resource management framework.

Details

Ecology and Strategy
Type: Book
ISBN: 978-1-84950-435-5

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