The Impact Of Slack Resource And Political Connection On Diversification: The Moderating Effect Of Institutional Environment And Equity

In recent years, diversification strategy was considered as an important approach to enlarge the size of enterprise by Chineselisted company, which was praised highly by directors. To adopt diversification strategy, enterprises need a lot of resources. Political connection may provide external resources and organizational slack may offer internal resources for diversification strategy. Hence to explore the impact of political connection and organizational resources on diversification strategy may explain the strategy implementation of enterprises. On the other hand, the development of enterprises cannotdeviate from institution environment, which may influence the strategy of the enterprises. Besides nature of property right may be an influence factor. So to study the moderating role of institutional environmentand nature of property right may afford explanation to the choice of strategy.The paper selected listed company of China between 2009 and 2013 as the research samples. After analyzing the data of these samples, it found that the influence of political connection improved industry diversification. It also found that available slack and recoverable slack both had negative correlation with industry diversification. It also found that themoderating role of institutional environment only existed in the relationship between recoverable slack and industry diversification. Finally it found that positive relationship between political connection and industry diversification was strengthened in state-owned enterprise, which was weaken in private enterprise. The conclusions of this paper may help to understand the behavior of diversification strategy.