Product diversification and financial performance: The moderating role of secondary stakeholders

Weichieh Su, Eric W.K. Tsang

Research output: Contribution to journalReview articlepeer-review

36 Citations (Scopus)

Abstract

The challenges firms face increase with their product diversification levels because different product markets possess different sociopolitical issues. We argue that secondary stakeholders, as represented by various nonprofit or non-governmental organizations, serve as agents mitigating the external constraints embedded within sociopolitical environments. Firms should therefore maintain relationships with different secondary stakeholder scopes commensurate with their product diversification levels in order to enhance financial performance. Analyzing a sample of U.S. Fortune 500 firms during the period from 1996 to 2003, we found that secondary stakeholders play a positive moderating role in the relationship between product diversification and financial performance. Furthermore, this moderating effect was stronger in the case of unrelated diversification than in related diversification.

Original languageEnglish
Pages (from-to)1128-1148
Number of pages21
JournalAcademy of Management Journal
Volume58
Issue number4
DOIs
Publication statusPublished - Aug 1 2015

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Business, Management and Accounting(all)
  • Strategy and Management
  • Management of Technology and Innovation

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