A Structural Analysis of the Effectiveness of Buying Firms' Strategies to Improve Supplier Performance

Many manufacturing firms have increased the amount of component parts and services they outsource, while refocusing on their core capabilities. Outsourcing parts and services to independent, external suppliers means that suppliers' performance is increasingly critical to the long‐term success of these buying firms. Buying firms are increasingly using disparate supplier development strategies to improve supplier performance including supplier assessment, providing incentives for improved performance, instigating competition among suppliers, and direct involvement of the buying firm's personnel with suppliers through activities such as training of suppliers' personnel. Using resource‐based theory, internalization theory, and structural equation modeling, we examine the impact of these supplier development strategies on performance. We conclude that direct involvement activities, where the buying firm internalizes a significant amount of the supplier development effort, play a critical role in performance improvement.     

To fit in or stand out? How optimal distinctiveness in technological diversification affects firm performance

Previous research has observed technological diversification from a strategic viewpoint and regarded it as a strategy used by firms to differentiate themselves from competitors. This perspective, however, overlooks the fact that firms' strategies can also be understood as conformity to institutional pressure to gain legitimacy. In order to study the technological diversification–firm performance relationship from a more comprehensive viewpoint, this paper starts from a strategic balance perspective and investigates how technological diversification conformity enhances firm performance. Using a unique dataset of Chinese listed firms' patenting activities from 2003 to 2014 and adopting ordinary least squares (OLS) regression, we produce empirical findings that reveal a curvilinear (inverted U-shaped) relationship between firms’ conformity in technological diversification and their performance. Our results further delineate the boundary conditions that influence this relationship. We find that firm age positively moderates the relationship, that is the conformity-performance relationship is steeper with the older firms. Moreover, the result suggests that state ownership negatively moderates the relationship, that is, the relationship is flatter when firms are controlled by the state.     

Diversification strategies of developing country firms

Large diversified firms have been a dominant factor in the economies of many developing countries. Nonetheless, they have received only limited research attention, and consequently our knowledge of the nature and extent of their behaviour is limited. This research sought to contribute to filling this gap. Analysis of 163 diversification moves undertaken by 44 firms in various developing countries shows a considerable variation across developing regions and over time in terms of the objectives that drive the diversification activities and the strategies pursued to implement them. This variation can largely be attributed to specific characteristics of countries and regions that affect the behaviour of firms.     

Technological Diversification and Organizational Divisionalization: The Moderating Role of Complementary Assets

This study uses data on 582 electronics and information technology firms in Taiwan for the period 1997–2005 to investigate the hypothesis that technological diversification increases the extent of organizational divisionalization under firm growth. This study applies competence‐based theory to argue that firms spread the technological competence base to achieve firm growth. However, in the face of firm growth, managers of multi‐technology firms often utilize a multi‐division structure to manage their various technologies based on their operating characteristics or needs. Furthermore, the findings of this study indicate that complementary assets moderate the negative relationship between technological diversification and organizational divisionalization. For firms with specialized complementary assets, multi‐technology firms may be observed to consolidate related‐technology activities into fewer divisions, facilitating the utilization of these complementary assets in conjunction with other divisions.     

信息不对称与服务企业多元化程度及其绩效关系研究

以57家中国服务企业为样本,通过均值比较和回归分析研究了信息不对称同服务型企业多元化程度,以及多元化程度与服务型企业绩效之间的关系。研究发现,在服务企业中,经验服务业的多元化程度高于搜索服务业的多元化程度;服务企业的经营绩效与多元化程度呈正相关关系。     

The effects of international diversification on the link between product diversification and performance in a boom and bust cycle: Evidence from Spanish firms (1994–2014)

This study examines the individual effects of product diversification on performance and the moderating effects of international diversification on the product diversification–performance link in the context of a boom and bust cycle. Most prior research on firm strategies largely neglect the business cycle. We use data on a large sample of Spanish manufacturing firms from 1994 to 2014. In this period, the Spanish economy experienced a boom period (1994–2008) and a bust period involving a severe economic crisis (2009–2014). Our study highlights the important role of each stage of the economic cycle. Specifically, with respect to product diversification, our findings show that in a boom, moderate diversifiers obtain better profitability levels than their highly diverse or limited diversification counterparts do. In contrast, during an economic downturn, moderate and high diversifiers can be equally effective up to some point of optimization. Our findings also reveal a negative and significant effect of internationalization on profitability, independent of the stage of the economic cycle. Product and international diversification are complementary strategies during a period of economic growth when firms opt for moderate levels of product diversification. Meanwhile, when firms choose high levels of product diversification, both types of strategies are complementary during the boom cycle, but substitutive during the bust cycle.     

中小企业的董事会结构与战略选择——基于中国企业的实证研究

本文从委托代理理论和资源依赖理论出发,以中国深圳证券市场中小企业板的上市公司为研究对象,探讨中小企业的董事会结构与战略选择的关系。研究结果表明,董事会结构对公司的多元化战略有着显著的影响,而与委托代理理论相比,资源依赖理论能够更好地解释这种影响。笔者认为,这是由于:中小企业规模较小,所有者对于公司经营管理的介入度比较高,所以委托代理问题并不明显;而缺乏资源则是制约众多中小企业多元化扩张的主要瓶颈。     

Internal knowledge generation: the research laboratory and innovative productivity in the pharmaceutical industry

As firms face increasing pressures associated with new forms of knowledge-based competition, researchers have begun to focus on knowledge acquisition strategies to the point of ignoring knowledge creation strategies. This paper investigates the impact of research centers in the pharmaceutical industry upon this neglected form of knowledge creation–innovation productivity. We find that firms with separate research facilities are more innovative than firms without such facilities. The results diverge when locational distance of the laboratory is considered for patent versus drug innovations, and vary across diversification types. These findings suggest that managers and researchers need to consider the relationship between the research center and corporate headquarters — and the role of the corporate headquarters — when developing knowledge generation strategies.     

Relationships between Top Management Team Characteristics and International Diversification: an Empirical Investigation*

Drawing on the executive demography and the upper‐echelons perspectives, this paper examines the relationships between top management team (TMT) characteristics (educational level, tenure, age, international experience and functional background) and firm international diversification. The study is based on a sample of 112 relatively large, internationally diversified US‐based firms in the manufacturing sector. Findings indicate that firms with higher levels of international diversification are likely to have TMTs characterized by higher educational level, shorter organizational tenures, younger executives and greater international experience. In addition, findings indicate that the relationships between TMT characteristics and international diversification are more dominant in better‐performing than in lower‐performing firms.     

Business model diversification: Demand relatedness,entry sequencing,and curvilinearity in the diversification-performance relationship

This study integrates research on business model diversification (BMD) and demand-side theory to examine the relationship of BMD to performance and the sequencing of business model additions. We begin by explaining and demonstrating that the overall degree of BMD has an inverted U-shaped relationship with firm performance. We next highlight the particular role that demand relatedness plays in BMD. We first provide evidence that the inverted U-shaped relationship flattens in times of financial shocks, consistent with arguments that the benefits of BMD from consumers’ willingness-to-pay for simultaneous use of multiple business models may diminish during shocks. Second, we argue that firms tend to sequence the addition of new business models based on demand relatedness, and we provide evidence that the degree of demand relatedness between a core and a target business model enhances the likelihood of diversification into that target business model.     

Understanding Drivers of Risk‐Adjusted Performance for Service Firms with International Operations*

This article investigates whether international operations of service firms increase performance while reducing risk. The article draws on a longitudinal dataset of 584 internationally operating service firms from the United States. Analysis indicates that international diversification is negatively related to risk‐adjusted performance. However, it is established that international diversification interacts with internationalization and positively influences risk‐adjusted performance. This finding offers significant promise for firms, as it indicates that international operations (if managed well), through exposure to varied foreign markets coupled with adequate global scope, can lead to firms’ increased risk‐adjusted performance. The results provide a mechanism for decision‐makers to better understand international operations of service firms and present a strategy for achieving success in international markets by effectively managing two important levers: internationalization and international market diversification.     

The Impact of Stakeholder Management on Corporate International Diversification

This article explores the relationship between stakeholder management and international diversification. We differentiate between strengths and concerns in stakeholder management to demonstrate the differential effects of the two aspects of stakeholder management. Previous research on stakeholder theory often focuses on the importance of stakeholder relations, trying to build a business case of relational capital that results from strong stakeholder management. Such a relational approach, however, overlooks the process of managing stakeholders, a process that allows firms with strengths in stakeholder management to develop an important capability of managing tensions. In this study, we argue that this capability, an inherent part of stakeholder management, can be critical when firms face increased complexity during the process of international diversification. We therefore propose that strengths in stakeholder management are positively related to international diversification, while concerns in stakeholder management are negatively related to international diversification. Using panel data for 169 US multinational firms over a 10‐year period, we find support that strengths in stakeholder management facilitate international diversification. We discuss the contributions of our findings to stakeholder theory and international business research.     

Product diversification through licensing: Empirical evidence from Chinese firms

Anecdotal evidence suggests that manufacturing firms are able to engage in product diversification through external technology acquisitions, such as technology licensing. However, there is little empirical evidence regarding this proposition to link inward technology licensing and firms’ product diversification or to suggest when and under what conditions the effect of diversification through this channel may be mitigated or augmented. The current study aims to address this research gap through an empirical investigation of a sample of 141 Chinese manufacturing licensee firms. The results indicate that inward technology licensing is positively related to a firm’s diversification and that this relationship is further moderated by a licensee firm’s R&D expenditure and technological distance relative to the licensor firm.     

公司的多样化战略与资本结构关系的实证研究

本文在分散风险理论、交易成本理论和代理成本理论的基础上,深入探讨了公司多样化战略与资本结构之间的内在关系,并形成研究假设。本文采用熵值指数来度量公司的多样化程度。经分层和回归检验后发现。公司经营多样化程度与负债水平呈显著正相关关系;不相关多样化公司的负债水平显著高于相关多样化公司;对不相关多样化公司来说,多样化程度是决定资本结构的重要因素。总之,研究结果支持了基于分散风险理论和交易成本理论的假设,拒绝了基于代理成本理论的假设。     

Agency conflict in diversified business groups and performance of affiliated firms in India: Contingent effect of external constraint and internal governance

This study examines how diversification in Indian business groups creates multiple forms of agency problems and has performance implications for group-affiliated firms. Departing from prior literature which emphasizes the principal–principal agency conflict in business groups, we argue that business group diversification leads to dual agency problems between controlling and minority shareholders (principal–principal) and shareholders and managers (principal–agent) in affiliated firms. Both these agency problems arise in diversified business groups through cross-subsidization of affiliated firms by inefficient capital investment, continuing presence of affiliated firms in declining industries, tunneling of resources from profitable affiliated firms, lack of attention by business group headquarters to affiliated firms, and affiliated firm managers' sense of perceived security, which negatively impacts affiliated firms’ performance. These agency issues are reduced with the increase in product market competition from exposure to international markets and through concentrated promoter ownership in the affiliated firms. Our hypothesized model finds empirical support in a sample of 828 business group–affiliated firms in India.     

Service diversification and growth of professional service firms

This study investigates the impact of service diversification on the rate and mode of firm growth in professional service firms (PSFs). Drawing on the extant PSF literature, we identify differing views regarding the growth impact of service diversification. Specifically, some scholars suggest that the external client benefits associated with service diversification should allow PSFs to expand revenues at a rapid pace and pursue less merger and acquisition activity, whereas others imply that increased diversification can cause internal challenges with respect to learning costs, coordination and innovation that can limit the rate of revenue growth and encourage more mergers and acquisitions. We test these competing views using longitudinal data on 137 accounting firms and cross-sectional data on 125 law firms and find that service diversification is negatively associated with the rate of firm revenue growth and positively associated with the use of mergers and acquisitions.     

The risk implications of diversification: Integrating the effects of product and geographic diversification

The risk implications of product diversification have received considerable attention from scholars. However, our understanding of the effects of geographic diversification on risk is more limited. Relying on resource-based theory to frame our arguments, we argue that despite some similarities, the two types of diversification have differing effects on firm risk. We first establish the risk reducing effects for product diversification. We then integrate the unique aspects of geographic diversification that serve as a boundary condition to the RBV perspective, arguing for the risk increasing effects of geographic diversification. Finally, since many firms pursue both forms of diversification simultaneously, we explore the joint effects of both product and geographic diversification. We test our hypotheses in a longitudinal model on a sample of S&P 500 firms. Our findings suggest that total product diversification, as well as related diversification reduce risk, while total geographic diversification increases risk. Furthermore, our data provide evidence of a complex combination of joint effects of these two forms of diversification. These findings offer a more complete understanding of the risk effects of corporate diversification.     

私营企业的企业家背景、多元化战略与企业业绩

本文运用"高阶理论"考察了私营企业的企业家背景、多元化战略选择以及企业业绩之间的关系.研究发现,与低学历的、年长的、创业前没有"企业负责人"经历的企业家相比,高学历的、年轻的以及创业之前曾担任过"企业负责人"的企业家更倾向于选择多元化战略.研究也发现,高学历、低年龄、"企业负责人"经历与高的销售额、资产额、资产增长率和净资产增长率正相关;多元化战略能够带来更大的资产规模、更高的资产增长率和净资产增长率,但对利润率没有显著的影响.同时,企业家的背景与多元化战略的交互作用同样影响着企业的业绩.创业前有过"企业负责人"经历的企业家采用多元化战略可以带来更好的业绩,而没有这种经历的企业家则会收到负面的效果.有意思的是,高学历和低学历的企业家采用多元化战略都提高了企业的销售额、资产额和净资产增长率,而中等学历的企业家采取多元化战略则带来了相反的效果.本文最后对该现象的可能原因进行了探讨.     

International Diversification,Business Group Affiliation and Firm Performance: Empirical Evidence from India*

We investigate the impact of business group affiliation on the relationship between international diversification and firm performance for emerging economy firms. We develop the theoretical arguments based on an integration of the literature on international diversification with the institutional theory perspective. We argue for a U‐shaped relationship between international diversification and firm performance, and suggest that a firm's affiliation to a business group moderates the relationship between international diversification and firm performance. Based on a sample of Indian firms, we find that firm performance is positively related to the degree of internationalization, while business group affiliation reduces the positive effect of internationalization on firm performance.     

From technology race to technology marathon: A behavioral explanation of technology advancement

In industries characterized by continual progress from lower to higher generations of technology, firms seek to solidify their competitive position by deploying technologies more advanced than their current ones. This study attempts to provide behavioral explanations for the degree of technology advancement pursued by a firm. Using data from the flat panel display industry, we find that the extent of a firm's technology advancement is largely determined by how far it falls below the industry average. Our findings complement prior research on technology races by suggesting that firms in the thin-film-transistor liquid-crystal display (TFT-LCD) industry largely attempt to run a “marathon” rather than a sprint: the degree of technology advancement is mainly guided by a desire not to fall behind the pack as opposed to trying to move ahead of the pack in order to win the race. By the same token, firms exceeding the industry average in their technology reveal little motivation even to maintain their lead, much less extend it.