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The effect of Inter- and Intra- regional geographic diversification strategies on firm performance in China

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Title: The effect of Inter- and Intra- regional geographic diversification strategies on firm performance in China
Authors: Ren, J
Tsai, H
Eisingerich, A
Item Type: Journal Article
Abstract: Purpose This study theorizes and empirically examines the effects of intra- and inter-regional geographic diversification on firm performance in China. Furthermore, it investigates the key firm capabilities, which moderate the relationships between intra- and inter-regional geographic diversification and firm performance. Design/methodology/approach In this research, we studied 366 listed companies that invest in mainland China. We used the Taiwan Economy Journal database to construct a panel dataset from 2005 to 2014 and employed panel regression estimations as part of our empirical analyses. Findings We find that the effect of regional diversification on firm performance is significantly influenced by the contexts of the expansion. More specifically, the results show that the effect of intra-regional geographic diversification on firm performance takes the form of a U-shape relationship. In contrast, we find that inter-regional geographic diversification has a negative effect on firm performance. Firm marketing, R&D, and managerial capabilities moderate these relationships. Research limitations/implications First, the companies studied in this research are mainly Taiwanese manufacturers with investments in mainland China. Second, the current model can be expanded by exploring additional process explanations and moderators in future research. Practical implications An important practical implication of this research is that when firms choose an intra-regional expansion strategy in China, they should adopt a moderate provincial diversification strategy in the invested region and reinforce its marketing capability to enhance firm performance. A careful consideration of a firm’s marketing, R&D and managerial capabilities is needed for successful regional diversification strategies in the China market. Originality/value The findings of this study contribute significantly to the existing literature on firms’ regional diversification. First, we explore and empirically test intra- and inter-regional geographic diversification strategies in China. We find that the effect of regional diversification on firm performance varies according to the contexts of the expansion (for instance, global, regional, in a single country). Second, this study furthers the research theme of intra- and inter-regional diversification by introducing and investigating previously unexplored firm capabilities as part of the framework.
Issue Date: 13-Jan-2020
Date of Acceptance: 5-Jan-2019
URI: http://hdl.handle.net/10044/1/66348
DOI: 10.1108/MD-01-2018-0104
ISSN: 0025-1747
Publisher: Emerald
Start Page: 16
End Page: 38
Journal / Book Title: Management Decision
Volume: 58
Issue: 1
Copyright Statement: © 2019, Emerald Publishing Limited
Keywords: Social Sciences
Business
Management
Business & Economics
Emerging market
Firm performance
China
Corporate strategy
Firm capability
Intra-regional geographic diversification
Inter-regional geographic diversification
RESEARCH-AND-DEVELOPMENT
INTERNATIONAL DIVERSIFICATION
PRODUCT DIVERSIFICATION
MODERATING ROLE
MULTINATIONALITY
MANAGEMENT
INNOVATIVENESS
PROFITABILITY
CORPORATIONS
INVESTMENTS
1503 Business and Management
1505 Marketing
2202 History and Philosophy of Specific Fields
Business & Management
Publication Status: Published
Appears in Collections:Imperial College Business School