The Empirical Analysis On The Diversification Strategy, Corporate Govenance And Innovation Investement

Innovation-driven development strategy and corporate governance have become important driving factors of Chinese companies implementing international diversification strategy. Theory suggests that international diversification strategy and innovation investment show different relationship. We extend this view by developing and testing the premise that their interaction is contingent on product diversification strategy and corporate governance. This paper using2006-2013panel data of listed companies in China, we have analyzed the relationship between the international diversification strategy and innovation investment. In contrast to the existing literature and empirical research, this paper focuses on the specific forms of international diversification strategy and innovation investment. In addition, product diversification strategy and corporate governance adjust the relationship between international diversification strategy and innovation investment.The empirical result shows that a U-shaped relationship between the international diversification strategy and innovation. This means that the company’s innovative investment falling instead of rising due to the focus on new markets in the initial implementation of international diversification, and with the further expansion of international multilateral regional market, the company’s innovation investment will gradually increase. The related product diversification strategy has a positive role in moderating the relationship between the international diversification strategy and innovation investment, on the contrary, unrelated product diversification has a negative regulatory role.The factors of corporate governance also generate heterogeneous moderating effects. The regulation of good ownership structure and executive incentive is better than the poor companies. While the regulatory role of CEO tenure has been only partially supported, and the moderating role of the structure of Board has not been verified. In addition, the secondary moderating effect of good governance structure companies would be better than in the poor ones during the process of implementing international diversification strategy and product diversification strategy.The empirical results show that the analysis of international diversification strategy for the company’s innovative mechanisms must cross the direct relationship between the international diversification strategy and innovation investment, and focus on the relationship between the two black boxes or condition factor. Through the above results, this paper gives a new perspective to explain the relationship between the international diversification strategy and innovation investment.