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Why, when, and how to diversify? A comparison between Western theories and the cognition of Chinese enterprises

Abstract

This paper uses as research samples 140 papers on enterprise diversification published in top-notch Western journals, and public statements from 30 influential contemporary Chinese CEOs on enterprise diversification. Both the qualitative open coding and the qualitative factor analysis are employed to analyze the two samples respectively, and then the corresponding analysis is utilized to explore the differences between Western theories and the cognition of Chinese enterprises on the motivation (why), timing (when) and industry choice (how) of enterprise diversification. Results show that, first, both consider the motivation of diversification mainly from the perspectives of resource-based view and asset portfolio theory. However, Western theories pay more attention to the factors related to the perspectives of the resource-based theory, transaction cost theory and agency theory, while Chinese enterprises put more emphasis on those factors associated with the asset portfolio theory, government policies and institutional theory. Second, on the cognition of the timing of diversification, Western theories insist that enterprises should diversify when they meet threats, while the practice of Chinese enterprises insists that diversification should take place when enterprises have enough strength. Third, Western theories focus more on the interrelationship between the original industry and the intended industry than on the attractiveness of the intended industry, while Chinese enterprises pay more attention to attractiveness than interrelationship.

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Author information

Correspondence to Liangding Jia.

Additional information

Translated from Guanli Shijie 맜理世界 (Management World), 2005, (8): 94–104

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Keywords

  • diversification
  • motivation
  • timing
  • industry choice