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Institutional determinants of the product scope of the firm in Asia

Track: Policy and Strategy

Keywords: Scope of the firm, product diversification, institutions, agency problems, emerging economies

Despite recent progress on an institution-based view of corporate diversification, there is relatively little empirical evidence on the direct effect of institutions on the product scope of the firm. We examine how institutions as an external determinant directly affect product diversification using data for 6,427 firm-year observations in nine emerging economies in Asia. We find that high quality of corporate governance is negatively associated with firms’ degree of product diversification while well-developed financial institutions are positively related to the degree of product diversification for the post-Crisis sample.

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