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1 – 10 of over 18000Qiang Wang, Haidi Zhou and Xiande Zhao
This study examines the firm-level financial consequences caused by supply chain disruptions during COVID-19 and explores how firms' supply chain diversification strategies…
Abstract
Purpose
This study examines the firm-level financial consequences caused by supply chain disruptions during COVID-19 and explores how firms' supply chain diversification strategies, including diversified suppliers, customers and products, moderate the negative effect on firm performance.
Design/methodology/approach
Based on data drawn from 222 publicly traded firms in China, the authors use event study methodology to estimate the effects of supply chain disruptions on the financial performance of affected firms. Regression analyses are conducted to examine the moderating effects of supply chain diversification.
Findings
Firms affected by supply chain disruptions during COVID-19 experienced a significant decline in shareholder value in two weeks and a subsequent decrease in operating performance in one year. Diversified suppliers, customers and products act as shock absorbers to alleviate the negative effects. Further regression shows a substitution effect between customer and product diversification. Cross-industry comparisons reveal that service firms experienced more loss than manufacturing firms. Customer diversification mitigates the adverse effects of supply chain disruptions for both manufacturing and service firms. Supplier diversification exerts a noteworthy role in manufacturing firms, while product diversification is beneficial for service firms.
Originality/value
The study provides empirical evidence on the magnitude of financial consequences of supply chain disruptions during COVID-19 in both the short term and long term and enriches the current understanding of how to build resilience from the supply chain diversification perspective.
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The relationship between diversification and organizational performance has been the subject of numerous studies over the years (Palepu, 1985; Rumelt, 1974). However, strategy…
Abstract
The relationship between diversification and organizational performance has been the subject of numerous studies over the years (Palepu, 1985; Rumelt, 1974). However, strategy scholars have universally defined diversification using a narrow definition, namely that corporate diversification is a function or reflection of the number of products/businesses in a firm's portfolio. The present study argues that such a definition has become outdated given the impact of international market diversification (Kim, Hwang, & Burgers, 1989; Rugman, 1979). Integrating these two views of corporate diversification, we investigate diversification‐performance differences using market‐ and product‐based measures of diversification and an international sample. Results suggest that the traditional model of diversification may not be applicable to all countries and that international differences exist.
Jooh Lee, Ernest H. Hall and Matthew W. Rutherford
This paper examines the relationship between international diversification and performance by matching a sample of 400 U.S. and 400 Korean firms on industry type and testing the…
Abstract
This paper examines the relationship between international diversification and performance by matching a sample of 400 U.S. and 400 Korean firms on industry type and testing the relationship over five years (1992–1996). Results indicate that U.S. firms show a positive association with regard to international diversification and performance, but a negative relationship between product diversification and performance. Korean firms, however, show a positive association with both types of diversification. In addition, Korean firms' strategies were associated more with sales‐based measures, while U.S. firms were associated more closely with profit‐based measures. These results suggest that the two countries do not approach diversification in the same way.
The aim of this paper is to investigate how e‐commerce may influence international and product diversification.
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.
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Thomas Hutzschenreuter, Ingo Kleindienst, Florian Groene and Alain Verbeke
The purpose of this paper is to address how firms adapt their product and geographic diversification as a response to foreign rivals penetrating their domestic market by adopting…
Abstract
Purpose
The purpose of this paper is to address how firms adapt their product and geographic diversification as a response to foreign rivals penetrating their domestic market by adopting a behavioral perspective to understand firm-level strategic responses to foreign entry.
Design/methodology/approach
The study proposes that strategic responses to foreign entry selected by domestic incumbents have both a framing component and a related, strategic choice component, with the latter including changes in product and geographic market diversification (though other more business strategy-related responses are also possible, e.g. in product pricing and marketing). This study tests a set of hypotheses building on panel data of large US firms.
Findings
The study finds, in accordance with our predictions, that domestic incumbents reduce their product and geographic diversification when facing an increase in import penetration. However, when increased market penetration by foreign firms takes the form of FDI rather than imports, the corporate response appears to be an increase in product and geographic diversification, again in line with our predictions.
Originality/value
The study develops a new conceptual framework that is grounded in prospect theory, but builds on recent insights from mainstream international strategic management studies (Bowen and Wiersema, 2005; Wiersema and Bowen, 2008).
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Tim Kessler and Michael Stephan
As an answer for the limited growth potentials of diversification and internationalization, services became increasingly important for industrial firms in recent years. Based on…
Abstract
As an answer for the limited growth potentials of diversification and internationalization, services became increasingly important for industrial firms in recent years. Based on existing and established business concepts, companies explore new segments in their traditional value chains beyond traditional market penetration strategies: they pursue service transition strategies to open up new sources for growth, even in markets that do not promise great expansion potential. Our paper addresses the issue of economies of scope of service transition. In this context, we first explore the question, to what extent the insights about product diversification strategies from physical goods sectors can be transferred to the service sector. Using competence-based considerations on diversification we focus on dynamic economies of scope, whose central idea is exploration and development of new resources rather than the static exploitation of existing ones. Furthermore, we integrate the largely neglected issue of how the phenomenon of service diversification depends on the industry's life cycle stage. In a small empirical study of the German mechanical engineering industry we demonstrate that diversification steps into services require a shift in the resource and competence base of firms. Using a dynamic perspective, we construct a conceptual framework for analyzing and explaining the advantages of service transition strategies. The developed model describes a service diversification trajectory and points out that the establishment of a profitable service business requires the exploration and development of competences and adequate organizational structures.
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 operate…
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.
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Ning Shen and Zhiyi Zhuo
Based on upper echelons (UE) theory, the purpose of this study is to investigate a conceptualized moderated mediation model for examining the effects of top management team (TMT…
Abstract
Purpose
Based on upper echelons (UE) theory, the purpose of this study is to investigate a conceptualized moderated mediation model for examining the effects of top management team (TMT) heterogeneity and firm value in China through the mediating effect of product diversification, the moderating effect of ownership type between TMT heterogeneity and product diversification and the moderating effect of executive shareholding between product diversification and firm value.
Design/methodology/approach
Unbalanced panel data were collected over 5 years with a total of 6,597 observations, organized through the WIND (Wind Economic Database) and CSMAR (China Stock Market and Accounting Research) Database. The hypotheses were tested using structural equation modeling and analyzed with stata15.0 software.
Findings
The results indicated that product diversification plays a mediating role between TMT heterogeneity and firm value. In China, TMT heterogeneity of non–state-owned enterprises plays a more significant role in promoting product diversification than that of state-owned enterprises; executive shareholding strengthens the relationship between product diversification and firm value.
Research limitations/implications
The characteristic dimension of TMT is seen as a relatively static factor, and it is worth looking at whether a more dynamic system of evaluation and measurement can be established.
Originality/value
This study enriches theoretical research on TMT and contributes to UE theory in several ways. First, we studied the mediation effect of product diversification between TMT heterogeneity and firm value. This extends research on UE theory to possible process variables. Second, considering the influence of the unique institutional environment in China on corporate strategic decisions, the study investigates state-owned and non–state-owned enterprises. Specifically, it looks at the influence of ownership type as a moderating variable between TMT heterogeneity and product diversification. Third, the paper discusses the moderating effect of executive shareholding on the product diversification–firm value relationship. The research contributes to agency theory and expands research on different economic systems by implementing agency theory.
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Yu Lin, Shuaishuai Zhang and Yingjie Shi
The purpose of this paper is to examine the impact of operational stickiness on product quality. Particularly, it analyzes the moderating effect of product diversification on the…
Abstract
Purpose
The purpose of this paper is to examine the impact of operational stickiness on product quality. Particularly, it analyzes the moderating effect of product diversification on the relationship between operational stickiness and product quality of exporting firms from China.
Design/methodology/approach
Using a sample of 3,567 exporting firms between 2002 and 2012 in China, this paper develops a fixed effect model to demonstrate the nonlinear relationship between operational stickiness and product quality.
Findings
Results show that operational stickiness has an inverted U-shaped impact on product quality, while inventory stickiness, property, plant and equipment (PPE) stickiness and labor stickiness are used to measure operational stickiness. Furthermore, the impact of operational stickiness on product quality is found to be moderated by product diversification.
Practical implications
Managers can achieve an optimal level of product quality by adjusting the level of operational stickiness. Firms with excessive operational stickiness should appropriately reduce the degree of stickiness to improve product quality. Besides, managers who focus on product quality should be cautious in adopting the product diversification strategy and be wary of the loss of product quality this strategy may cause.
Originality/value
This paper is the first study that has empirically validated the inverted U-shaped relationship between operational stickiness and product quality, and confirmed the moderating effect of product diversification on the relationship between operational stickiness and product quality. It provides a new idea to improve product quality by operational management.
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Ranjitha Ajay and R Madhumathi
– The purpose of this paper is to empirically examine the impact of earnings management on capital structure across firm diversification strategies.
Abstract
Purpose
The purpose of this paper is to empirically examine the impact of earnings management on capital structure across firm diversification strategies.
Design/methodology/approach
The study focuses on firms operating in the manufacturing sector (diversified and focused). Panel data methodology compares diversification strategies and identifies the impact of diversification strategy with earnings management practices on capital structure decision.
Findings
International and product diversified firms have lower levels of leverage than focused firms in their capital structure. Asset-based earnings management is positive for diversified (market/product) firms. Earnings management using discretionary expenditure (project based) is found to be higher for market diversified but product-focused firms. Earning smoothing method is found to be significant for focused firms and shows a negative relationship with capital structure.
Originality/value
This study offers an insight into the relationship between corporate diversification, earnings management and capital structure decisions of manufacturing firms. The results provide an important contribution to accounting and strategy literature. A distinction is made between market- and product-diversified firms and influence of earnings management practices (asset-based, project-based and earnings smoothing (ESM)) on capital structure decisions. Diversified firms (market/product) tend to have lower levels of leverage than focused firms and earnings management practices within firm groups significantly influence the capital structure decisions.
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