The Impact of the Type of Diversification of Listed Construction Enterprises in China on Corporation Performance
The construction industry is the pillar industry in
China, accounting for about 6% of the gross domestic product. Along
with changes in the external environment of the construction industry
in China, the construction firm faces fierce competition. The paper
aims to investigate the relationship between diversified types of
construction firm and its performance in China. Based on generalist
and specialist strategy in organizational ecology, we think a generalist
organization can be applied to an enterprise with diversified
developments, while specialist groups are extended to professional
enterprises .This study takes advantage of annual financial data of
listed construction firm to empirically verify the relationship between
diversification and corporation performance establishing a regression
equation to econometric analysis. We find that: 1) Specialization can
significantly improve the level of profitability of listed construction
firms, and there is a significant positive relationship with corporate
performance; 2) The level of operating performance of listed
construction enterprises which engage in unrelated diversification is
higher than those with related diversification; 3) The relationship
between state-owned construction firms and corporate performance is
negative. The more the year of foundation is, the higher performance
will be; however, the more the year of being listed, the lower
performance will be.
[1] A.Liu, and Y.B. Li "Organizational Performance: A Competence-based
Model of China-s Construction State-owned Enterprises," in 2010 Proc.
Engineering Project Organizations Conference pp.1-24.
[2] M. T. Hannan, and J. Freeman, "The Population Ecology of Organization,"
American Journal of Sociology., vol.82, no.5, pp. 929-964,1977.
[3] G.R Carroll, and J. Delacroix, "Organizational mortality in the newspaper
industries of Argentina and Ireland: An ecological approach,"
Administrative Science Quarterly; vol. 27, no. 2, pp.169-198, 1982.
[4] H.I Ansoff, "Strategies for diversification," Harvard Business Review,
pp.113-124, 1957.
[5] R.P. Rumelt, "Diversification strategy and profitability," Strategic
Management Journal´╝îvol.3´╝îpp. 359-369, 1982.
[6] Y.D. Tao, J. Yan and H.Y, Yan, "Choice of Specialization or
Diversification Strategy Based on The Construction of The Core
Competencies of Enterprise," Construction Economics (Chinese version),
vol. 12, pp.76-79, 2007.
[7] A.Shen, and Y.C.Liu , "The Study of Diversified Development Strategy
of Construction Enterprises," Cooperative Economic and Technological
(Chinese version), vol.12, pp.28-29, 2009 .
[8] C.Z Niu, and X.F. Li, "The Literature Review of Performance
Management," Scientific & Technical Information(Chinese version)., vol.
34, no.5 pp.103-104, 2005.
[9] H.H Chang, and G.D Fernando, D. Srinivasan, and A. Tripathy, "A
Re-Examination of Diversification and Firm Productivity," 2011. August
15,. Available at SSRN: http://ssrn.com/abstract=1909930.
[10] R. A. Bettis, and W.K. Hall, "Diversification strategy, accounting
determined risk and accounting determined return," Academy of
Management Journal, vol. 25, pp.254-264, 1982.
[11] M.L. Federcio, "The relationship between diversification and firm-s
performance: is there really a causal relationship?" IESE Business School
University of Navarra. Working Paper, 2011 February, WP-907.
[12] J.Yao, Y. Nv Y. and H.L. Lan, "Empirical Research of the Relationship
between Diversification of China's Listed Companies and the Economic
Performance," Management Science (Chinese version). vol.11, no.1, pp.
119-135, 2004.
[1] A.Liu, and Y.B. Li "Organizational Performance: A Competence-based
Model of China-s Construction State-owned Enterprises," in 2010 Proc.
Engineering Project Organizations Conference pp.1-24.
[2] M. T. Hannan, and J. Freeman, "The Population Ecology of Organization,"
American Journal of Sociology., vol.82, no.5, pp. 929-964,1977.
[3] G.R Carroll, and J. Delacroix, "Organizational mortality in the newspaper
industries of Argentina and Ireland: An ecological approach,"
Administrative Science Quarterly; vol. 27, no. 2, pp.169-198, 1982.
[4] H.I Ansoff, "Strategies for diversification," Harvard Business Review,
pp.113-124, 1957.
[5] R.P. Rumelt, "Diversification strategy and profitability," Strategic
Management Journal´╝îvol.3´╝îpp. 359-369, 1982.
[6] Y.D. Tao, J. Yan and H.Y, Yan, "Choice of Specialization or
Diversification Strategy Based on The Construction of The Core
Competencies of Enterprise," Construction Economics (Chinese version),
vol. 12, pp.76-79, 2007.
[7] A.Shen, and Y.C.Liu , "The Study of Diversified Development Strategy
of Construction Enterprises," Cooperative Economic and Technological
(Chinese version), vol.12, pp.28-29, 2009 .
[8] C.Z Niu, and X.F. Li, "The Literature Review of Performance
Management," Scientific & Technical Information(Chinese version)., vol.
34, no.5 pp.103-104, 2005.
[9] H.H Chang, and G.D Fernando, D. Srinivasan, and A. Tripathy, "A
Re-Examination of Diversification and Firm Productivity," 2011. August
15,. Available at SSRN: http://ssrn.com/abstract=1909930.
[10] R. A. Bettis, and W.K. Hall, "Diversification strategy, accounting
determined risk and accounting determined return," Academy of
Management Journal, vol. 25, pp.254-264, 1982.
[11] M.L. Federcio, "The relationship between diversification and firm-s
performance: is there really a causal relationship?" IESE Business School
University of Navarra. Working Paper, 2011 February, WP-907.
[12] J.Yao, Y. Nv Y. and H.L. Lan, "Empirical Research of the Relationship
between Diversification of China's Listed Companies and the Economic
Performance," Management Science (Chinese version). vol.11, no.1, pp.
119-135, 2004.
@article{"International Journal of Business, Human and Social Sciences:60426", author = "Yi-Hsin Lin and Ying-Ying Li", title = "The Impact of the Type of Diversification of Listed Construction Enterprises in China on Corporation Performance", abstract = "The construction industry is the pillar industry in
China, accounting for about 6% of the gross domestic product. Along
with changes in the external environment of the construction industry
in China, the construction firm faces fierce competition. The paper
aims to investigate the relationship between diversified types of
construction firm and its performance in China. Based on generalist
and specialist strategy in organizational ecology, we think a generalist
organization can be applied to an enterprise with diversified
developments, while specialist groups are extended to professional
enterprises .This study takes advantage of annual financial data of
listed construction firm to empirically verify the relationship between
diversification and corporation performance establishing a regression
equation to econometric analysis. We find that: 1) Specialization can
significantly improve the level of profitability of listed construction
firms, and there is a significant positive relationship with corporate
performance; 2) The level of operating performance of listed
construction enterprises which engage in unrelated diversification is
higher than those with related diversification; 3) The relationship
between state-owned construction firms and corporate performance is
negative. The more the year of foundation is, the higher performance
will be; however, the more the year of being listed, the lower
performance will be.", keywords = "Diversification, Specialization, Construction Firm, Performance.", volume = "7", number = "6", pages = "1764-5", }