An Relationship Research Among Diversification Strategy Company’s Diversification Strategy,Organization Synergy And Corporate Performance

The diversification strategy has been widely adopted by current parent-subsidiary companies. The earliest studies for diversification come from the western developed countries and the mainstream view tend to inverted U-shaped relationship between diverficication strategy and performance.However, China is still in the initial stage of market economy and the external market mechanism is still not perfect, thus it is difficult for diversification companies to get required capital, technology, human resource and information effectively through external market. So we need to further explore if the inverted U-shaped relationship between parent-subsidiary companies’ diversification and performance is still valid under the background of economic transition? What kind of impact the degree of market-oriented of different regions have on the parent-subsidiary diversified approaches? Meanwhile, synergy is the value performance for this organization form of parent-subsidiary company, and it is also the key for diversification creating value.For parent-subsidiary company, this synergy is not only comes from business but also reflected in the organization level that between parent and subsidiary company. Based on this, this paper starts with synergy between parent company and subsidiary company under the background of economic transition, measures the relationship between parent-subsidiary company diversification strategy, synergy and corporate performance and explores whether parent-subsidiary company synergy will bring intermediary function between parent-subsidiary company diversification strategy and corporate performance in order to reveal internal mechanism of how the parent-subsidiary company diversification strategy improves corporate performance. This article select a sample of188from Shanghai and Shenzhen listed companies and base on the related and unrelated diversification strategy, We get following conclusions by building relational model and empirical analysis:Firstly, under the background of economic transition in China, parent-subsidiaries’ related diversification may promote its performance better compared to unrelated diversification, this refelct that in emerging market, diversification premium effect is more prominent and the reversed U-shaped relationship between parent and subsidiary company is invalid; Secondly, Parent-subsidiary companies prefer to carry out unrelated diversification strategy in regions that have the lower degree of market-oriented, this point further reveal the specific relationship between external market environment and diversified way; Thirdly, there is a significant positive correlation between the diversification of parent-subsidiary companies and organization synergy, also we find that the organization synergistic effect of related diversification strategy is superior to unrelated diversification, this further enrich the connotation of diversification synery from organizational level:Fourthly, the organization synergy of parent-subsidiary companies has a intermediary role in the relationship between diversification and corporate performance, that is to say the reason why related diversification is superior to unrelated diversification in promoting corporate performance is that related diversification create more synergistic effect in parent-subsidiary companies. These conlusions further clarify the relationship among parent-susidiary diversification, organizational synergy and corporate performance in emerging market and provide some new revelation for the decision-making and implementation of parent-subsidiaries’ diversification strategy under the background of special system.