The Impact of Global Diversification as Growth Corporate Strategy to Performance: An Investigation on Taiwan Electronics Firms

Abstract

Since Taiwan emerged as an innovation-driven country focused on technology innovation, diversifications as a proactive growth strategy facilitate Taiwan electronics firms to survive and sustain performance under global competitive markets. Furthermore, after the New Southbound Policy (NSP), SEA countries, alongside their unique cultural and institutional characteristics, provides opportunity and challenges to Taiwan electronics firms. The primary goal of this research is to look at the influence of products and international diversification as global growth strategic decisions on Taiwan electronics firms' performances. First of all, the study examines whether the product and international diversification as firm-level factors influence a firm's performance. Second, to determine if running both product and international diversity concurrently has a good or negative impact on performance. Lastly, to explore the influence of psychic distance in terms of cultural and corruption dimensions as a country-level factor to see its moderating effect. This study applies panel data regression of generalized least squares method to test the sample of 3256 observations with 407 firms during 2013-2020 (8years). The findings show a negative relationship between product diversification and performance; an inverted U-shaped relationship exists between the degree of international diversification and performance, and an inverted U-shaped relationship exists between the interaction of product and international diversification and performance. Notably, the finding also suggests a significant cultural and corruption dimension effect on the correlation between diversification strategies and performance.