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The diversification effects of a firm's political connection and its performance implications: Evidence from China

Abstract: Purpose The purpose of this paper is to comprehensively investigate the combined influence of a firm's political connection and diversification on corporate performance, and to explore whether firm's political connection has an impact on the diversification effect, and whether this diversification effect would promote its performance significantly or not. Design/methodology/approach The research used a regression model to explore the correlation among political connection, diversification strategy, and corporate performance. The research subjects are the private enterprises listed on Shanghai and Shenzhen Stock Exchange in China for the period 2002-2005. Findings The study found that: first, for those firms without political connections, the relationship between diversification strategy and corporate performance displayed an inverted U curve; for firms with political connection, the relationship was a reverse L. Second, firms with political connections are more likely to implement a diversification strategy, especially unrelated diversification. Third, when implementing an internationalization strategy, private enterprises with political connections are more likely to expand through unrelated diversification strategy. Fourth, the diversification of the enterprises with political connection are more likely to promote the short-term accounting performance than those without political connection, but the unrelated diversification of politically connected enterprises would have a negative impact upon its future performance, that is to damage the company's market value. Originality/value The paper expands the literature on the relationship between diversification and firm performance. It contributes to the research about the influence of political connection upon corporate performance.

The purpose of this paper is to comprehensively investigate the combined influence of a firm's political connection and diversification on corporate performance, and to explore whether firm's political connection has an impact on the diversification effect, and whether this diversification effect would promote its performance significantly or not. The research used a regression model to explore the correlation among political connection, diversification strategy, and corporate performance. The research subjects are the private enterprises listed on Shanghai and Shenzhen Stock Exchange in China for the period 2002-2005. The study found that: first, for those firms without political connections, the relationship between diversification strategy and corporate performance displayed an inverted U curve; for firms with political connection, the relationship was a reverse L. Second, firms with political connections are more likely to implement a diversification strategy, especially unrelated diversification. Third, when implementing an internationalization strategy, private enterprises with political connections are more likely to expand through unrelated diversification strategy. Fourth, the diversification of the enterprises with political connection are more likely to promote the short-term accounting performance than those without political connection, but the unrelated diversification of politically connected enterprises would have a negative impact upon its future performance, that is to damage the company's market value. The paper expands the literature on the relationship between diversification and firm performance. It contributes to the research about the influence of political connection upon corporate performance.

http://www.emeraldinsight.com/journals.htm?issn=1750614X&volume=6&issue=3&articleid=17051110&show=abstract

http://www.deepdyve.com/lp/emerald-publishing/the-diversification-effects-of-a-firm-spolitical-connection-and-its-Z4BJWu1vr7

Relational mechanisms, market contracts and cross-enterprise knowledge trading in the supply chain: Empirical research based on Chinese manufacturing enterprises
Abstract: Purpose The purpose of this paper is to study the effects of relational mechanisms and market contracts on cross-enterprise knowledge trading in supply chain and to examine the role of market contracts. Relational mechanism is categorized into indirect and direct relational mechanism in this paper. Crossenterprise knowledge trading is categorized into explicit and tacit knowledge trading. The indirect relational mechanism is mainly expressed by knowledge brokers, while the direct relational mechanism consists of shared goals and trust. Design/methodology/approach Multiple regression analysis was performed on questionnaire data from 256 Chinese manufacturing enterprises in supply chain in order to assess the relationships between relational mechanisms, market contracts and cross-enterprise knowledge trading. Findings The results show that knowledge brokers and market contracts have significant and positive effects on explicit knowledge trading, but the effects on tacit knowledge trading are not significant. Shared goals and trust have significant and positive effects not only on explicit knowledge trading but also on tacit knowledge trading, while trust has a stronger positive effect on tacit knowledge trading than explicit knowledge trading. Finally, the moderating effects of market contracts are proven in the relationships between relational mechanisms and knowledge trading, excluding the relationship between knowledge brokers and tacit knowledge trading. Originality/value Previous studies about the cross-enterprise knowledge trading in supply chain focused on theoretical research which did not match with reality, especially in China, where the relational mechanism in trading activities is strong. Based on relational exchange theory and transaction cost theory, a conceptual model for the effects of relational mechanisms and market contracts on crossenterprise knowledge trading in supply chain is proposed in this paper, and then empirically tested using the data collected from 256 Chinese manufacturing enterprises in supply chain with multiple regression models. The findings provide a theoretical basis for knowledge trading participants selecting an appropriate governance mechanism to promote knowledge trading, and these also guide the knowledge trading among members of supply chain in practice.