Chapter 6: Conclusions
6.3 Future research
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measure product diversity by Herfindahl index (HI) of product sales. The product data is collected from the Product Portfolio Database of Taiwan Economic Journal (TEJ).
The database lists the product items for each firm. The product name may be different from firms to firms and even different from years. The presentation in product portfolio list is not clear, which cannot provide me the detail of each product items without clear presentation of product names. Thus, there is a measurement limitation in product diversification. I cannot provide a further discussion by measure the related diversification and unrelated diversification.
I measure the industry experience of directors by the unique numbers of sub-industries directors from the focal firm have multiple board appointments in and the industry experience of block shareholders by the average number of sub-industries block shareholders from the focal firm invest in. There is a measurement limitation in experience data. Individual build their knowledge and resource from all kinds of experience not only from their appointment as directors or investment but also from their prior working experience or even from their education. The experience variables in this study only measure the experience from multi appointment, prior CEO experience, and multi investment.
In this study, I measure the experience of board and block shareholders separately. In the real situation, some directors may invest in the focal firm or be the top management of focal firm. This study does not examine the dual role of directors and block shareholders in focal firm.
6.3 Future research
The empirical analysis is based on the data of Taiwanese electronic firms. The
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variables of board’s industry experience, board’s top management experience, and block shareholders’ industry experience are measured within electronic industry of Taiwan. Directors and block shareholders may not only accumulate their experience from other electronic sub-industry but also accumulated from other industry. The influence of industry experience out of electronic industry would have different impact on the relationship between product diversification and firm performance.
Future research should investigate the different impact of experience in different industry on product diversification.
This study examines the experience of block shareholders from top 10 investors of each firm. Colpan et al. (2011) address that foreign shareholders and domestic shareholders have different influence on firm’s diversification strategy and firm performance. Institutional investors usually are more related knowledge than individual investors. However, institutional investors may be professional in investment not in firm operation. The impact of institutional investors and individual on firm performance is not clear. Different types of shareholders play different role in firm operation. Future research should investigate the different impact of different types block shareholders on product diversity. The different types of block shareholders include foreign versus domestic investors and individual versus institutional investors.
There are different types of directors in a board such as inside directors and outside directors. This study only discusses the impact of board’s experience in an entire board. Future research should examine the influence of different types of directors and their human capital on firm operation.
In this study, I collect product diversification data and human capital data from
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2002 to 2013. Future research should cover a longer time period and more recent data in product diversification and human capital research.
Product diversification strategy is a complex phenomenon. Different industries have different strategy and engage in different types of product expansion. Thus, the discussion on the impact of product diversification on firm performance will be complex. Future research need to do more qualitative research include case study and field study to understand the essence and dynamic behavior of diversification in emerging markets.
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Appendix A: Index of Electronic Sub-industry
Taiwan Economic Journal (TEJ) develops a sub-industry index for Taiwanese companies. This index classifies companies from main operation activities which include companies’ sales composition and end product. According to the index from TEJ, there are 62 sub-industries in electronic industry. The list of electronic sub-industry is shown in following.
TEJ Sub-industry code TEJ Sub-industry name
M15D Automobile Module
M23B3X Other PCB Materials
M23B4A VGA Card
M23C3 PC Laboratories
M23C4A CD, DVD, BD
M23C4B HD, RAID
M23C6B LED Epi-wafer & Chip
M23C6C LED Package Applicat
M23C7 Solar Energy
M23C8A LCD Panel Board
M23C8B Back Light Module
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M23K2 Communication Equipment
M23K3 Communication Net
M23K4 ISP/ICP