A REVIEW ON BUSINESS GROUP AFFILIATION, DIVERSIFICATION STRATEGIES AND FIRM PERFORMANCE

Abstract

Product diversification and international diversification are the strategies that are implemented by firms in emerging and developed economies. These strategies have favorable or negative impacts on firm performance and firms’ context may affect this relationship. Business group is one of the contexts that may affect the relations between product diversification strategy, international diversification strategy and firm performance. Business groups can provide member firms with valuable resources and knowledge for pursuing these strategies. Existing studies have examined the diversification strategies and performance relations in various economies and several moderating factors in this relationship; however, the role of business group affiliation has been addressed to a lesser extent. Therefore, this study discusses the relations between product diversification, international diversification strategies and firm performance considering the business group affiliation. Following the relevant literature, this study also presents propositions which can be examined further. The propositions suggest that emerging economy firms can perform better by implementing product diversification and international diversification; however, these two strategies may also harm firm performance. Moreover, group affiliation may have favorable or negative moderating impact in these relations when firms pursue product or international diversification. This study aims to provide foundations for future studies on diversification strategies, firm performance and business group affiliation relationships.