Strategy, capabilities, and business group performance

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.

Balancing patent portfolios and R&D efforts: examining firm performance

“…This is a distinct concept from product diversification studied by early research and many studies have provided supporting evidence for the potential benefits of TD on firm performance (Ceipek et al. , 2019; Wang et al. , 2020).…”

“…Narrowly, diversification means firm-level TD: the firm's technological resources reflected in the patent portfolio affect the diversification strategy (Corrocher and Ozman, 2020). This is a distinct concept from product diversification studied by early research and many studies have provided supporting evidence for the potential benefits of TD on firm performance (Ceipek et al, 2019;Wang et al, 2020). Several empirical results have shown the relationship between TD and firm performance to be linear and non-linear, suggesting that Balancing patent portfolios and R&D efforts this has both positive and negative effects.…”

“…Regarding the impact of diversification in a wider range, there have been studies on corporate diversification in the past (Liu and Hsu, 2011). In recent times, research on industry diversification (Wang et al, 2020), product diversification (Galavotti et al, 2017) and international diversification (Li and Lo, 2017) comprises the mainstream of diversification research (Wang et al, 2020). Moreover, geographicalregionaldiversification has also been discussed (Tsai et al, 2020).…”

“…Regarding the impact of diversification in a wider range, there have been studies on corporate diversification in the past (Liu and Hsu, 2011). In recent times, research on industry diversification (Wang et al. , 2020), product diversification (Galavotti et al.…”

Divestiture strategy, CEO power and firm performance

“…From a theoretical perspective, our research enriches the strategic management literature on the divestiture-performance relationship. We embraced the model developed by Haynes et al (2002), Haynes and Hillman (2010) and Ung et al (2018a), Wang et al (2019), with a slight modification in measures and definitions. Our findings confirm the entrenchment hypothesis of the agency theory by showing that the existence of a powerful CEO might help the firm to slow down the decreasing performance due to divestiture.…”