This study examines the effect of diversification strategy on the performance of Korean FDI companies and identifies the relationship between diversification strategy and international joint ventures(IJVs). In this study, diversification is categorize...
This study examines the effect of diversification strategy on the performance of Korean FDI companies and identifies the relationship between diversification strategy and international joint ventures(IJVs). In this study, diversification is categorized by product and geographical diversification and performance is measured by profitability(ROA, ROE, ROS).
To accomplish this purpose, this study reviewed various concepts of diversification strategy and relationships between diversification strategy and performance, diversification strategy and IJVs from previous studies. Based on these literature reviews, this study established five hypotheses. The data of profitability was collected in the financial statements. The collected data were statistically analysed by T-test and ANOVA method.
The major findings of this study are as follows:
1. With respect to geographical diversification strategy, the profitability of Korean FDI firms with high diversification was greater than the profitability of firms with low diversification.
2. With respect to the degree of product diversification strategy, the profitability of firms with diversification was greater than those firms with low diversification.
3. The effect of geographical diversification strategy on FDI firm performance was greater than that of product diversification strategy on perfermance.
4. With respect to relationship between diversification strategy and IJV, the results showed that, compared with the firms of related diversification strategy, the firms of unrelated diversification strategy preferred IJV mode of entry into foreign country.