Exploring The Potential Of Diversification Strategy For Listed Manufacturing Companies

Diversification strategy is an important way for company growth and is favored by many Chinese listed companies,yet the results of diversification are subject to a high degree of uncertainty.Theoretical studies and management practices are consistent,and contradictory findings have been found.This paper argues that previous research has ignored the anti-synergy costs that arise when diversification strategies achieve synergies.Based on the resource-based view,this paper proposes that the difference in IT resources and R&D capabilities among companies may be a situational factor that can influence the relative magnitude of synergy and anti-synergy in the diversification process.This paper uses the entropy index method to code and calculate the index of the degree of company diversification for a sample of manufacturing listed companies in Shanghai and Shenzhen from 2008 to 2019,and distinguishes between two types of strategies: relevant diversification and non-relevant diversification,and uses multiple regression analysis and conducts robustness tests to empirically test the relationship between diversification strategy and company performance,IT resources and R&D capabilities on diversification strategy and company performance.The results found that:(1)The total diversification,unrelated diversification and firm performance are significantly negatively related,while the negative relationship between related diversification and firm performance is not significant;(2)The coordination,control,information exchange and cross-business knowledge sharing provided by IT resources can enhance the synergy effect of diversification strategy and reduce the anti-synergy cost.The more IT resources are invested,the less negative effect of diversification on firm performance;(3)The moderating effect between IT resources on diversification and firm performance is greater in related diversification than in unrelated diversification due to the difference of shared resources in different types of diversification strategies.(4)The moderating effect of R&D capabilities on total diversification strategy and firm performance is insignificant,the moderating effect of R&D capabilities on related diversification strategy and firm performance is significant,and the moderating effect of R&D capabilities on unrelated diversification strategy and firm performance is insignificant.The possible contribution of this paper is that the findings enrich previous studies on the relationship between diversification strategies and firm performance by taking into account the presence of anti-synergy effects,using IT resources,an important ICT product,as a moderating variable,and studying the effect of IT resources on the relationship between diversification and firm performance in the different institutional context of China,while finding that due to the different nature of shared resources,the relevant Diversification requires more coordination and control due to the nature of shared resources.The moderating effect of R&D capabilities on diversification strategy and firm performance is investigated using R&D capabilities as a core capability of the firm,and it is found that R&D capabilities plays a more significant role in related diversification strategies.