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Article
Publication date: 29 July 2022

Rizal Yaya, Rudy Suryanto, Yazid Abdullahi Abubakar, Nawal Kasim, Lukman Raimi and Siti Syifa Irfana

The global recession caused by the COVID-19 pandemic has led to the closure of thousands of village-owned enterprises (VOEs), which are community-managed enterprises that…

Abstract

Purpose

The global recession caused by the COVID-19 pandemic has led to the closure of thousands of village-owned enterprises (VOEs), which are community-managed enterprises that operate in the hostile rural areas in emerging economies. Thus, considering that a Schumpeterian view of economic downturn sees recessions as times where old products/services decline while new products/services emerge, this paper aims to explore the specific innovation-based diversification strategies that matter for the survival of emerging economy VOEs in recession periods to develop new theoretical insights.

Design/methodology/approach

The study is based on multiple-case studies of 13 leading VOEs operating in the rural areas of Java Island in Indonesia, an emerging economy. The data was analysed using within-case and cross-case analyses.

Findings

Overall, a number of major novel findings have emerged from the analysis, based on which the authors developed several new propositions. First, from the perspectives of both new product and new service diversification, “unrelated diversification” is the primary resilience strategy that seems to be associated with the survival of VOEs in the COVID-19 recession, over and above “related diversification”. Second, from an industrial sector diversification perspective, the most dominant resilient strategy for surviving the recession is “unrelated diversification into tertiary sectors (service sector)”, over and above diversification into the primary sector (agriculture, fisheries and mining) and secondary sector (manufacturing and construction).

Originality/value

The authors contribute to the literature on entrepreneurship in emerging economies by identifying the resilience diversification strategies that matter for the survival of VOEs in recession.

Details

Journal of Entrepreneurship in Emerging Economies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2053-4604

Keywords

Article
Publication date: 7 January 2019

Michal Lysek

Axis, HMS and Sectra are three Swedish companies whose managers argue that you should never be radical on two fronts: creating new products for new markets at the same…

Abstract

Purpose

Axis, HMS and Sectra are three Swedish companies whose managers argue that you should never be radical on two fronts: creating new products for new markets at the same time. This paper aims to show however that while Axis’ managers claim not to be radical on two fronts, they still perform horizontal diversification, but they do so by disguising it as product development. Just like certain animals disguise themselves for protection, Axis’ managers disguise diversification as a defense mechanism, to protect themselves. In so doing, they have learned to manage the dynamics of innovation, by shifting between periods of focus and diversification.

Design/methodology/approach

This study was based on an inductive research approach influenced by grounded theory. In total, 32 interviews were performed with top and middle-line managers from three Swedish companies: Axis, Sectra and HMS. A total of 91 A4 transcript pages, 66 A4 e-mail pages, 52 annual reports (from 1999 to 2017) and 256 company presentations and newspaper articles (from 1988 to 2015) were collected and analyzed. Open and selective coding yielded 105 sub-categories, which were grouped into four main categories and presented as detailed descriptions. The results were based on the interpretation of those descriptions and related to disguise as a defense mechanism in psychology.

Findings

Innovation is a difficult process often met with hostility. Axis’ managers however have found a way to go beyond their existing business domain, while still protecting themselves from internal and external opposing forces that would go against such a risky strategy. To do so, they first expand their existing business domain. Then they perform horizontal diversification and disguise it as product development, as a defense mechanism to protect their desire to create innovation from managers who would oppose their risky strategy. In so doing, they convince other stakeholders that innovation through diversification is the best strategy for their company.

Research limitations/implications

This study was only performed at three Swedish technological companies. For future research, other Swedish companies could be included, and not only technological companies either, to explore whether diversification is considered a strategy that needs to be disguised in other businesses as well, and how managers from those businesses deal with internal and external forces.

Practical implications

Managers from Axis, Sectra and HMS are fully aware that innovation as well as diversification is difficult. Ideas that seem interesting and full of potential for some people may seem too risky and dangerous for others. To protect diversification as a strategy for innovation, Axis’ managers have found a way to disguise diversification, and make it seem less dangerous. In so doing, they are able to diversify and create innovation. A strategy for disguising diversification therefore has practical managerial implications of how managers can deal with internal and external forces that would go against such a strategy.

Originality/value

This study connects defense mechanisms in psychology with innovations strategy and innovation management and solves a practical dilemma that managers often struggle with: how to create innovation despite barriers that exists and oppose such a strategy. Managers will most likely always face different barriers to innovation, and perhaps solving them is not possible. This study shows how Axis’ managers have found a way to go around this problem, when solving it is not possible. This strategy thus shows originality and value for both theory and practice related to innovations strategy and innovation management.

Details

International Journal of Innovation Science, vol. 11 no. 1
Type: Research Article
ISSN: 1757-2223

Keywords

Article
Publication date: 23 September 2022

Aparna Bhatia and Meenu Khurana

The paper aims to measure the nature and extent of international diversification followed by Indian companies over the period 2009–10 to 2017–18. The study also aims to…

Abstract

Purpose

The paper aims to measure the nature and extent of international diversification followed by Indian companies over the period 2009–10 to 2017–18. The study also aims to assess the pattern of transition of companies to various strategies of international diversification.

Design/methodology/approach

Jacquemin and Berry’s (1979) entropy approach has been applied to measure the extent and assess the nature of international diversification. Further, the study deploys two-dimensional categorical framework advocated by Vachani (1991) and categorizes the firms into four international diversification strategies.

Findings

Larger proportion of companies in internationally low diversification (ILD) strategy reveals low extent of international diversification of Indian companies. The pattern of diversification depicts that the trend of moving forward is speeding up sequentially toward higher strategies of growth. Both the extent and pattern depict that the nature of diversification is shifting from relatedness to un-relatedness with transitions from intra-regions to inter-regions. The study confirms the applicability of eclectic theory and psychic distance Uppsala model in determining the preference of international diversification strategies and process of internationalization respectively in Indian firms.

Originality/value

The paper is first of its kind on account of several reasons. First, such a comprehensive evaluation of preferences for international diversification strategies has never been taken up with reference to emerging economies, especially India. Second, the paper is not static and does not limit itself only to the identification of favored strategies of Indian companies but also gauges the transitional behavior of Indian companies across different strategies at different points of time. In fact it is the first study to statistically research the applicability of psychic distance model in firms in emerging economy. Third, the results not only measure the quantum of international diversification but also assess the extent of relatedness and un-relatedness followed by Indian companies.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 1 January 2006

Francisco J. Mas, Juan L. Nicolau and Felipe Ruiz

The purpose of this study is to examine the impact on firm performance of foreign concentration vs diversification strategies, as well as the moderating role played by…

4964

Abstract

Purpose

The purpose of this study is to examine the impact on firm performance of foreign concentration vs diversification strategies, as well as the moderating role played by market, product and firm characteristics.

Design/methodology/approach

Moderated regression analysis is used.

Findings

Distribution and cultural distance (CU) moderate the relationship between foreign concentration‐diversification and stock market performance; while the non‐repetitive character of product purchase moderates the relationship at an accounting performance level.

Research limitations/implications

First, the lack of information prevented us from examining other groups of determining factors. Second, the possible existence of bias in the results due to the selection of stock market quoted firms.

Practical implications

Managers must realise that CU, distribution channel, and the product factor of non‐repeat purchase, play an important role in the choice of a concentration vs diversification strategy when explaining business results. Government authorities should develop training programmes for firms located in middle‐income countries in order to detect the CU with target markets, as well as the development of effective distribution channels and of product strategy in these markets.

Originality/value

The findings of this study and the implications proposed show the relevance of this topic. The paper focuses on a middle‐income country (Spain) and uses two measurements of firm performance: an accounting rate and a market measure based on the event‐study (excess returns on the stock market generated by the announcement of a foreign expansion).

Details

International Marketing Review, vol. 23 no. 1
Type: Research Article
ISSN: 0265-1335

Keywords

Article
Publication date: 27 April 2020

Aditya R. Khanal

The agricultural sector in the USA has experienced significant structural changes. For accommodating farm business, households have diversified their operations adopting…

Abstract

Purpose

The agricultural sector in the USA has experienced significant structural changes. For accommodating farm business, households have diversified their operations adopting various strategies—agricultural, structural, environmental, and income strategies. The purpose of this study is to analyze the factors influencing farmer’s diversification strategies while taking into account the simultaneous decision-making process.

Design/methodology/approach

This study uses a nation-wide farm household data from the US. The diversification decisions are analyzed using multivariate probit regressions.

Findings

The study suggests that agricultural, structural, environmental, and income diversification strategies are interlinked. Specifically, results indicate that, on one hand, environmental and income diversification strategies are positively interlinked. On the other hand, agricultural and structural diversification strategies are positively interlinked. Additionally, the factors representing location, farm, and farmer characteristics, farm type, and financial condition of the farm are major determinants in the choice of farm diversification strategies.

Research limitations/implications

In this paper, diversification activities are broadly classified under four strategies: agricultural, structural, environmental, and income. Depending on the context and country, the definition and strategy set may need revision.

Practical implications

Strong complementary between diversification strategies suggests that studies analyzing farm household decisions and strategies need to account for the simultaneous decision-making process. As decisions are interlinked, separately analyzing one specific strategy may lead to biased estimates. Farm business households need to develop multiple skills and flexible capacities to tackle farming-related issues, including structural changes, risk management, and income enhancing activities. Improving employment opportunities for the rural farming population can stimulate structural diversification.

Originality/Value

This paper contributes to limited literature about diversification by analyzing factors influencing different diversification decisions and finds interlinkage between decisions.

Details

Journal of Agribusiness in Developing and Emerging Economies, vol. 10 no. 3
Type: Research Article
ISSN: 2044-0839

Keywords

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…

1139

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

Article
Publication date: 18 December 2009

Soo W. Kim

The premise of this paper is that coordination between market‐related diversification strategies and supply chain management (SCM) strategies will lead to better…

1050

Abstract

The premise of this paper is that coordination between market‐related diversification strategies and supply chain management (SCM) strategies will lead to better performance than when the two strategies are pursued independently. Viewed in this perspective, this research proposes that (supply chain) SC integration plays an intermediate role in influencing the relationship between diversification and performance. In order to confirm the validity of the above proposition, structural equation model was used to analyze the interrelationships among SC integration level, diversification level, SCM performance, and firm performance. The results of this study suggest that in small firms in which the direct effect of diversification on firm performance is absent relatively, the level of SC integration may be a critical intervening variable that could lead to successful diversification, while in case of large firms, SC integration may play an important infrastructural role for direct effects of diversification level on firm performance. This is helpful in developing a framework for linking a firm's SC integration strategy to its market/product diversification strategy, and also in identifying how SCM function can play a role in developing and supporting corporate competitive strategy to improve organizational performance.

Details

Asian Journal on Quality, vol. 10 no. 3
Type: Research Article
ISSN: 1598-2688

Keywords

Article
Publication date: 24 August 2012

Xinming Deng, Zhilong Tian, Jianfeng Li and Muhammad Abrar

The purpose of this paper is to comprehensively investigate the combined influence of a firm's political connection and diversification on corporate performance, and to…

1795

Abstract

Purpose

The purpose of this paper is to comprehensively investigate the combined influence of a firm's political connection and diversification on corporate performance, and to explore whether firm's political connection has an impact on the diversification effect, and whether this diversification effect would promote its performance significantly or not.

Design/methodology/approach

The research used a regression model to explore the correlation among political connection, diversification strategy, and corporate performance. The research subjects are the private enterprises listed on Shanghai and Shenzhen Stock Exchange in China for the period 2002‐2005.

Findings

The study found that: first, for those firms without political connections, the relationship between diversification strategy and corporate performance displayed an “inverted U” curve; for firms with political connection, the relationship was a “reverse L”. Second, firms with political connections are more likely to implement a diversification strategy, especially unrelated diversification. Third, when implementing an internationalization strategy, private enterprises with political connections are more likely to expand through unrelated diversification strategy. Fourth, the diversification of the enterprises with political connection are more likely to promote the short‐term accounting performance than those without political connection, but the unrelated diversification of politically connected enterprises would have a negative impact upon its future performance, that is to damage the company's market value.

Originality/value

The paper expands the literature on the relationship between diversification and firm performance. It contributes to the research about the influence of political connection upon corporate performance.

Article
Publication date: 1 January 1993

Chung‐Ming Lau

Three diversification strategies (related, unrelated, and related‐Jinked) are reviewed in terms of their organizational arrangements (coordination and control mechanisms)…

1358

Abstract

Three diversification strategies (related, unrelated, and related‐Jinked) are reviewed in terms of their organizational arrangements (coordination and control mechanisms), managerial mind sets (corporate managers' ways of doing business), and organizational learning climates (learning capacity and learning needs). It is suggested that conventional organization development techniques (both human‐processual and technostructural) are relevant for developing the necessary organizational arrangements and managerial mindsets of diversifies. The organizational transformation perspective of managing change is proposed as an effective way to develop the required organizational learning climate of diversified firms due to its dynamic and proactive nature.

Details

The International Journal of Organizational Analysis, vol. 1 no. 1
Type: Research Article
ISSN: 1055-3185

Article
Publication date: 24 April 2020

Florian Holzmayer and Sascha L. Schmidt

Professional football clubs have increasingly initiated two corporate diversification strategies to enfold growth opportunities besides traditional income sources…

1176

Abstract

Purpose

Professional football clubs have increasingly initiated two corporate diversification strategies to enfold growth opportunities besides traditional income sources: business diversification and international diversification. Empirical findings from management and sport management literature provide inconclusive evidence on these strategies' financial performance effects, necessitating further research. The purpose of this article is therefore to investigate how both corporate diversification strategies affect the financial performance of professional football clubs.

Design/methodology/approach

A 15-year panel data set of English Premier League (EPL) clubs is examined, many of which have employed corporate diversification strategies. Measures for related business diversification (RBD) and unrelated business diversification (UBD) as well as international diversification are established from management literature. Based on fixed effects regression models, their effects on clubs' revenues and profitability are then examined.

Findings

U-shaped effects from RBD on revenues and profitability are found, but no effects from UBD. These findings empirically support the theoretically appealing superiority of RBD over UBD and, with increasing levels of RBD, over a focused strategy in management literature. With international diversification, an inverted U-shaped effect on revenues is identified.

Research limitations/implications

Despite focusing only on the EPL, these findings provide new evidence of non-linear financial performance effects from corporate diversification strategies adding to (sport) management literature and setting the stage for future research on these strategies in professional football.

Practical implications

These findings have significant implications for club managers' strategic growth opportunities such as new business models or geographic markets.

Originality/value

This is the first study to empirically examine the financial effects of corporate diversification strategies in the football market context.

Details

Sport, Business and Management: An International Journal, vol. 10 no. 3
Type: Research Article
ISSN: 2042-678X

Keywords

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