Diversification and performance in China: An internal transaction view

This paper compares the performance of two groups (diversified versus nondiversified firms) that are publicly listed in the People's Republic of China (the PRC). It further discusses the impacts of internal transaction within the organization. It was found that higher performance was associated with a combination of higher related sales by low related purchase. Moreover, the internal transaction has different impacts on performance when firms adopted different diversification strategies. These research findings suggest that the transition to a market economy increased the intensity of competition in product market and therefore control of distribution channels seemed to be more important to leverage firm performance.