TMT Political Network, Diversification Strategy And Firm Value In Transition Economy

The performance of different strategy is an important issue in the field of strategic management study. Though researchers have studied the relationship between diversification strategy and corporate value in a long time, there's still no unified conclusion. With huge market and opportunities in the emerging economy in china, the domestic enterprises generally face the problem of business and geographic diversification. The market economy system is being gradually established during this special period of transition economies, and the rules of competition in the market are still not clear and difficult to be predicted compared to the western economies. How's the status of diversification during the economic transition, and how diversification influence on corporate value?Based on the resource-based theory, this article examines the relationship between diversification strategy and corporate value from business and geographic perspectives. It studies the impact of diversification on corporate value from both internal processes and external environment view. On the one hand, this article incorporates social capital theory with TMT theory.The social capital comes from the network of the TMT is a critical business resource for the company, and it's also an important factor during the implementation of the strategy. On the other hand, China is in a special period of economic transition, the unstable system and institution will have influence on the diversification of the corporation. Take ownership of the corporation and the level of market-oriented as measure of the transition economies, this article studies the effect of strategy revolution of the corporation. The empirical results show a partial positive relationship between diversification strategy and corporate value. Specifically, business diversification is not significantly related to the corporate value, geographic diversification is positively related to the corporate value. This article also studies the influence of political network of the TMT and transition economies' institutional environment on the geographic diversification's emplement. The empirical results show that:(1)With a high level of social capital comes from the political network of the TMT, the geographic diversification will make more influence on the corporate value; (2)the effect of geographic diversification to the corporate value in the non-state enterprises is more significant compared to the state-owned enterprises; (3)the effect of geographic diversification to the corporate value in the high level market-oriented district is more significant compared to the low level one.