| Summary: | <p>The strategic importance of corporate diversification on firm?s competitive advantage and superior financial performance has been extensively studied in the strategic management literature. However, in the field of operations management, there is a lack of research on whether and how corporate diversification strategies would impact a firm?s operational performance, and vice versa. To fill this research gap, in this dissertation, we conduct three empirical studies to investigate (1) how product and international diversification strategies influence a firm?s inventory performance; (2) how a firm?s existing resources and target market uncertainty jointly impact product scope expansion; and (3) how a firm?s utilization of resources impacts product scope expansion.
The first essay aims to investigate the impacts of two important corporate diversification strategies on firm?s inventory performance: product diversification (including related and unrelated diversification) and international diversification. Based upon a large firm-level data sample collected from Compustat Fundamental Annual and Compustat Segment, we find that firm?s inventory level increases with the degree of related product diversification but decreases with the degree of unrelated product diversification. There is also strong evidence that highly internationally diversified firms tend to hold more inventory.
Current research has investigated the importance of product scope to a firm?s operational performance (e.g., inventory efficiency, operational costs, and service levels). However, what drives a firm?s decision to expand its product scope remains under-studied. Recent real options research points to the role of uncertainty in the target market. The second essay adds to the literature by proposing that a firm?s resources endowments and target market uncertainty jointly influence its product scope. The empirical analysis confirms a curvilinear relationship between target market uncertainty and the likelihood of product scope expansion. More importantly, we find that different categories of resources alter the influence of target market uncertainty on product scope expansion differently.
Given the fact that firms are striving for improving operational efficiency and reducing operational slack (i.e., resources in excess of what is required to fulfill expected demand), the third essay focuses on the effects of a firm?s capacity, inventory, and supply chain slacks on product scope decision. Our empirical results reveal that firms with more production and inventory slacks are more likely to expand product scopes. Furthermore, our analysis demonstrates that market relatedness positively moderates the effects of production and supply chain slacks on the likelihood of product scope expansion, but negatively moderates the effect of inventory slack on the likelihood of product scope expansion.
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