A Study On The Impacts Of Cross-Regional Expansion On The Economic Performance Of Service Companies

In recent years, service industry in our country faces new opportunities and challenges under the background of the national policy support and the accelerated process of global integration. The cross-regional expansion has become an important strategy for service companies to achieve rapid development. Therefore, it is of great importance to study the relationship between the cross-regional expansion and firm performance.Based on the recalling of the expansion theory and the resource-based theory, this research constructed a model of cross-regional expansion’s impact on service business performance. In this model, the cross-regional expansion is the independent variable, the business performance is the dependent variable. At the same time, listed age, size and asset-liability ratio are control variables. Cross-regional expansion is divided into cross-province expansion and cross-nation expansion, and then is separately measured by two dimensions:degree and range. Business performance is measured by two dimensions:profitability and ability to grow. In addition, there are three variables to measure profitability:ROA, ROE and EPS, and operating profit growth is used to measure the ability to grow.Based on the data analysis, this research studies the relationship between cross-regional expansion and firm performance, and compare these two cross-regional expansion patterns. Based on the results, this paper draws the conclusions as follows. Firstly, the study finds out that a Chinese company’s cross-ration expansion has a significantly positive effect on performance, but the degree of cross-province has a negative effect on its profitability. However, the range has no significant effect; a service company’s cross-nation expansion has an even more positive effect on its size than cross-province. Therefore, the service business in China should pay more attention to the cross-nation expansion that can be helpful to enhance the performance when they have accumulated enough strength. Based on the results, this paper gives some suggestions and strategies from the internal and external situations of service business. First of all, positioning accurately, controlling the scale and rhythm of the expansion are the first considerations. Also, it is necessary for the business to adjust the strategies in time based on the environment of the new province or country. Thirdly, all the service companies that have the behavior of expansion should try their best to enhance their quality, build the core competitiveness and so on.