Global Diversification, Industrial Diversification, and Firm Value

What determines the scope of the firm over time and around the world? An Asia Pacific perspective

“…1 Even recent theoretical work that has considered other contingencies affecting product scope, such as time , has not considered the interaction of the two. This lack of attention is somewhat surprising given the large amount of anecdotal evidence, for example, in the case of US firms, that has twinned the two concepts together in the "product focus, global expansion" mantra of the 1990s and early 2000s (Bodnar, Tang, & Weintrop, 1997;Denis, Denis, & Yost, 2002;Meyer, 2006b;Tallman & Li, 1996). Our point, which we develop in more detail in subsequent sections, is simply that product scope and geographic scope need to be examined simultaneously in future research.…”

“…2 That said, many major MNEs are situated in large home country markets, and have consequently followed a regionalization, not a global, strategy when internationalizing (Delios & Beamish, 2005;Rugman & Verbeke, 2004). The point here is that internationalization-expansion of geographic scope-does have value (Bodnar et al, 1997;Morck & Yeung, 1991), it is just a matter of what is the limit to geographic expansion, beyond which further expansion may destroy value (Denis et al, 2002;Lu & Beamish, 2004;Nachum, 2004).…”

“…Because diversification-along product, geographic, or both dimensions-usually results in a larger organization and because managerial power, income, and prestige are usually correlated with the size of the firm, many managers may engage in empire-building. Once diversification becomes a norm, many eager empire-builders may jump on the bandwagon while performance may not be satisfactory (Denis et al, 2002). This seems to be one of the key reasons why South Korea experienced such heavy debt loads in the 1997 Asian economic crisis-certain chaebols Figure 2 What drives diversification strategies?…”

Revamping research on unrelated diversification strategy: perspectives, opportunities and challenges for future inquiry

“…While there is ample consensus on the economic and strategic logic underlining firms' decisions to operate in related businesses (Wan et al 2011), ''no absolute truths'' are found concerning the effectiveness of operating in unrelated businesses 1 (Montgomery 1994). Various studies have shown a negative relationship between the breadth of a business portfolio and corporate performance (e.g., Berger and Ofek 1995;Bettis and Prahalad 1995;Best et al 2004;Burch and Nanda 2003;Denis et al 2002;Lang and Stulz 1994;Lyandres 2007b;Maksimovic and Phillips 2002;Rajan et al 2000).…”

International Diversification and Performance: Evidence from Singapore

“…A great deal of research (recent work such as Denis et al, 2002;Palich et al, 2000) has investigated the value of diversification as a corporate strategy, and its impact on corporate performance. Traditionally, the U.S. market has been the focus of these studies, so we know little about the strategic value of diversification in an Asian country such as Singapore.…”