TY - JOUR
T1 - Institutional relatedness behind product diversification and international diversification
AU - Sun, Sunny Li
AU - Peng, Mike W.
AU - Tan, Weiqiang
N1 - Funding Information:
Acknowledgment We thank Stephen Cheung, Greg Dess, Jane Lu (editor-in-chief), Livia Markoczy, and two reviewers for helpful comments. An earlier version was presented at the Southwest Academy of Management (Dallas, March 2010). This research was supported in part by the National Science Foundation of the United States (CAREER SES 0552089), the Jindal Chair at UT Dallas, and the Faculty Research Grant (FRG2/10-11/ 091) at Hong Kong Baptist University. All views are those of the authors and not necessarily those of the sponsors.
PY - 2017/6/1
Y1 - 2017/6/1
N2 - Previous diversification research has largely focused on product relatedness, but ignored institutional relatedness—the degree of informal embeddedness with the dominant institutions that confer resources and legitimacy. We argue that during institutional transitions, political ties and international experience represent different types of institutional relatedness linking firms, respectively, to political institutions and market institutions. Specifically, CEOs’ political ties may help firms access critical resources, sense new market entry opportunities, and gain board support to increase firms’ product diversification. CEOs’ international experience may help firms leverage different market-based capabilities, engage in international competition, and then lead firms to grow on a different path by expanding internationally. We further investigate a crucial contingency factor: the degree of economic freedom. Data from 11,992 firm-year observations based on firms listed on China’s stock exchanges between 2001 and 2011 largely support our predictions.
AB - Previous diversification research has largely focused on product relatedness, but ignored institutional relatedness—the degree of informal embeddedness with the dominant institutions that confer resources and legitimacy. We argue that during institutional transitions, political ties and international experience represent different types of institutional relatedness linking firms, respectively, to political institutions and market institutions. Specifically, CEOs’ political ties may help firms access critical resources, sense new market entry opportunities, and gain board support to increase firms’ product diversification. CEOs’ international experience may help firms leverage different market-based capabilities, engage in international competition, and then lead firms to grow on a different path by expanding internationally. We further investigate a crucial contingency factor: the degree of economic freedom. Data from 11,992 firm-year observations based on firms listed on China’s stock exchanges between 2001 and 2011 largely support our predictions.
KW - Diversification
KW - Institutional relatedness
KW - Institutional transitions
KW - International experience
KW - Political ties
UR - http://www.scopus.com/inward/record.url?scp=85027968564&partnerID=8YFLogxK
U2 - 10.1007/s10490-016-9498-4
DO - 10.1007/s10490-016-9498-4
M3 - Journal article
AN - SCOPUS:85027968564
SN - 0217-4561
VL - 34
SP - 339
EP - 366
JO - Asia Pacific Journal of Management
JF - Asia Pacific Journal of Management
IS - 2
ER -