Diversification and performance: Evidence from east Asian firms

We examine the impact a diversification oil performance for firms operating ill different institutional environments during a relatively stable period and during a major economy-wide shock. We locate our study ill six Asian countries at different levels of institutional development. Results indicate that diversification negatively impacts performance ill more developed institutional environments while improving performance only ill the least developed environments. Even ill the least developed institutional environments, diversification offers limited benefits when an economy-wide shock strikes. Though successful diversifiers are sometimes affiliated with business groups, diversification is associated with poorer performance for both affiliated firms and independent firms. Ill sum, we find that the outcomes of diversification are influenced by institutional environments, economic stability and affiliation with business groups. Copyright (c) 2007 John Wiley & Sons, Ltd.