| Summary: | 碩士 === 國立東華大學 === 國際企業研究所 === 92 === Taiwan, a small island with scarce natural resources and restricted market, diversification and internationalization are two major business growth strategies for companies to maintain their competitiveness and to enhance profitability. Corporate governance in organization also has been becoming an interesting issue for recently years. In addition, past studies have asserted that decisions related to diversification and/or internationalization are often associated with the abundance of company resources. Based on the theoretical foundation of resource-based and agency theories, this paper proposes a conceptual framework to explore the relationship among governance structure (e.g., board size, fractional ownership of officers and directors, and CEO duality), corporate resources (e.g., marketing, R&D, operations, and mass production manufacturing capabilities), business growth strategies, and firm performance.
Our empirical data were sourced from Taiwan Economic Journal Co. Ltd. (TEJ, 台灣經濟新報), data base of Taiwan Institute of Economic Research (TIE, 台經院產經資料庫), and year books of Taiwan public-traded companies. Considering time lag effects, our empirical data gathered during the period from 2001 to 2003. First, independent variables (2001) measuring levels of governance mechanisms and corporate resources are predicted to explain dependent variables (2002) which are product diversification and internationalization. Second, independent variables measuring levels of related/unrelated product diversification, internationalization, and corporate resources (2001) are predicted to explain dependent variables which is performance (2002, 2003 and the average of 2002 and 2003). Specifically, we separate the whole samples into two parts: traditional and information industries. The total number of firms was 415 in the final base sample, which includes 239 companies from traditional industries and 176 ones from information industries.
We used hierarchical regression to test our hypotheses. In our empirical model yields several results. First, in traditional industries: (1) The strategy of related product diversification is positively related to the performance of net operating revenue, and the level of related product diversification ratio is positively associated with the performance of ROA and net operating revenue. Meanwhile, the strategy of internationalization was shown strongly influence the level of performance. (2) Except CEO duality, the other variables of governance mechanisms are all associated with product diversification, while CEO duality is only related to the strategy of internationalization. (3) Most corporate resources are positively associated with firm performance, except marketing capability. (4) None of corporate resources is positively associated with the strategies of product diversification, nevertheless having slightly impact on the strategy of internationalization. (5) The results are all the same in two year lag and the average of one year and two year lag performance data.
Second, in information industries: (1) The strategy of internationalization is only positively related to net operating revenue. For the strategy of product diversification, the higher of related diversification ratio leads the better performance in ROA and net operating revenue. Meanwhile, a minute part and concentrated unrelated product diversification would create better performance on ROA. (2) Except board size, the other variables of governance mechanisms are all associated with product diversification, while none of governance mechanisms is related to internationalization strategy. (3) Nearly most corporate resources including operations and mass production manufacturing capabilities are positively related to firm performance. However, the other resources of R&D and marketing capabilities are not. (4) None of corporate resources is positively associated with the strategies of product diversification, nevertheless having slightly influenced on the strategy of internationalization. (5) The results are not all the same in two year lag and the average of one year and two year lag performance data. In two year lag, related product diversification would be positively related to ROA, while unrelated diversification has no significant relationship in ROA any more. In short, unrelated product diversification would raise the profit of ROA in one year lag; while this advantage will disappear in two year lag. On the contrary, related product diversification would not show significant benefit in one year lag of ROA, while this advantage will comes from in two year lag. The other strategy of internationalization has shown a reverse result on ROA and net operating revenue. More specifically, the level of exporting ratio would not show significant associated with ROA in one year lag, while become related in two year lag, however this result is actually opposite to net operating revenue. Furthermore, R&D capability is actually having positively associated with ROA in two year lag, while the positively significant on cash flow in one year lag has gone.
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