Literature Review on Diversification Strategy, Enterprise Core Competence and Enterprise Performance

Abstract

Diversification is a strategic choice for enterprise expansion. Looking at the world, American companies in the 1960s and 1970s opened up a diversified path through large-scale mergers and acquisitions. However, by the 1980s and 1990s, American companies began to change from diversification to specialization , gradually returning to their main business, and the adjustment of this phenomenon made the performance of those companies significantly improved. Since then, how should companies abandon the choice of specialization and diversification strategy, and whether diversification is beneficial or unfavorable to corporate performance have become topics that domestic and foreign scholars are eager to study. Based on the concept, motivation and type of diversification strategy, this paper sorts out the relationship between corporate diversification strategy and corporate performance in domestic and foreign literatures. It is found that there is still no definitive answer to whether diversification strategy is beneficial to corporate performance. There are four different relationships: positive correlation, negative correlation and no significant correlation , and nonlinear correlation. The core competence of an enterprise is the fundamental support of diversified business operations and a deep-seated factor in the formulation and implementation of diversified business strategies. Research on the core competence of enterprises as a regulation or mediator of the relationship between diversification strategy and firm performance is still not perfect, and research in this field needs to be further explored.