While unrelated diversification (i.e., conglomeration) is deemed value-destroying in the West, many Chinese private firms have been enthusiastically pursuing such a growth strategy. Conventional institutional view of diversification sees conglomerates as responses to market imperfections in emerging economies and believes conglomeration is value-creating because conglomerates can effectively fill the institutional voids in the emerging markets. Our literature review shows that the conventional institutional view on conglomeration mainly focuses on the value-creating aspects while neglects the socially counterproductive rent-seeking aspects of conglomeration strategy in institution-weak countries (Khanna & Palepu, 2000). In this paper, we fill the gap by examining some unconventional diversifications and point out their rent-seeking nature in China. We have proposed an official-entrepreneur exchange theoretical model to account for such unconventional diversifications. Therefore, we adopt a case study approach to theory-building (Eisenhardt, 1989). We have made two contributions to knowledge. One is that we contribute to the diversification literature by identifying the unconventional diversification phenomenon and proposing a theoretical framework to account for it. The other is that we contribute to the institution-based view of strategy.
|Publication status||Published - 2014|
|Event|| 2014 IACMR Conference: Exploring New Concepts and Theories from Chinese Management - The China National Convention Center, Beijing, China|
Duration: 18 Jun 2014 → 22 Jun 2014
Conference number: 6
|Conference||2014 IACMR Conference: Exploring New Concepts and Theories from Chinese Management|
|Location||The China National Convention Center|
|Period||18/06/2014 → 22/06/2014|