Diversification, internationalization and performance: the case of Chinese business groups.

Summary This research analyzes the influence of institutional context on the relationship between strategic choices and performance of Chinese business groups, especially for diversification and internationalization strategies. From a theoretical perspective, this study updates the knowledge on the influence of the institutional context of the Chinese market. Thus, we deepen the understanding of how institutional voids and institutional transition in the Chinese market shape the strategic behavior of business groups and especially their diversification decisions. Moreover, the analysis of the internationalization process of Chinese multinationals requires the use of other theoretical frameworks than those proposed by the literature studying Western firms. Therefore, this study proposes a model based on the institutional factors that determine the global competitiveness and internationalization-performance relationship of Chinese multinationals. This research also confirms that, unlike developed market MNCs that can deploy their competitive advantages in host countries, the internationalization of Chinese MNCs is a process of learning and acquiring strategic assets to create new competitive advantages in order to narrow the competitive gap with developed market MNCs. From the empirical point of view, the analysis of Chinese business groups shows that: (1) Specialization and internationalization create value for Chinese business groups. (2) Unrelated diversification has a negative effect on group performance. (3) For the relationship between internationalization and performance, this research found an inverted U-shaped relationship as well as a negative association between institutional distance between China and host countries and the performance of Chinese multinational business groups.