Study On Relationship Between Geographic Diversification And Performance:Evidence From Listed Real Estate Company In China

The relationship between diversification and firm performance has been given a lot of attention.At the firm level,the impact of diversification on firm performance is a reflection of synergies and corresponding costs generated by coordinating various businesses.At present,diversification synergies have been extensively studied,however,less attention is paid on diversification costs or anti-synergies.Thus,this study aims to examine synergies created by within-industry domestic geographic diversification(WIDGD)of Chines real estate companies,and then analyzes the costs of WIDGD.Combining current classification of diversification synergies with some operating characteristics of Chinese real estate companies,the first part of this study tests the horizontal synergies,strategic synergies and financial synergies firms may obtain through WIDGD.The multiple regression analysis based on a panel data of 84 public listed real estate companies shows:(1)WIDGD has a positive impact on firm performance,and expansion speed has a negative impact on firm performance;(2)Industry growth,strategic coordination capability and activity coordination capability all have positive moderating effects on the relationship between WIDGD and firm performance;(3)Both industry growth and activity coordination capability have positive moderating effects on the relationship between expansion speed and firm performance,while strategic coordination does not.These findings indicate that,real estate companies not only achieve economies of scale and scope through WIDGD,but also achieve strategic synergies and financial synergies through coordinating various businesses and strategic activities located in different regions.Firms achieve synergies through the coordination of various businesses,in turn,which generates interdependencies among these businesses.The horizontal synergies and strategic synergies created by coordinating differently located businesses generate pool interdependencies among these business,meanwhile,the financial synergies created by coordinating different strategic activities generate sequential and reciprocal interdependencies among various businesses.Extensive interdependencies among firms'businesses and activities may lead to coordination complexity.In particular,when environmental changes in each region are highly heterogeneous,firms'adaptation become extremely complex.Under this perspective,this paper treats a real estate company as a complex system made up of a group of interdependent businesses located in different regions,then develops a measurement for the interdependency and adaptation complexity of the real estate company as a complex system.The multiple regression analysis based on a panel data of 80 public listed real estate companies shows:(1)Interdependency has a positive impact on firm performance;(2)Adaptation complexity has a negative impact on firm performance;(3)Activity coordination capability has a negative moderating effect on the relationship between adaptation complexity and firm performance.These findings not only provide empirical evidence for the complexity theory,but also extend current discussions on coordination cost of diversification from a static perspective to a dynamic perspective by looking at adaptation and coordination complexity that diversified firms faced during environmental changes.The study provides strong evidence for our understanding on within-industry domestic geographic diversification moves of Chinese real estate companies.It also highlights the contingency of industry on the relationship between domestic geographic diversification and firm performance.The underlining mechanisms between domestic geographic diversification and firm performance may vary significantly in different industry.Last,the findings on activity coordination capability indicate that firms could build dynamic capability through establishing dynamic activity systems.In other words,greater activity coordination capability facilitates adaptation during environmental changes with high complexity and uncertainty.