A consistent analysis of diversification decisions with non-observable firm effects

Article Abstract:

A study on company diversification explored the problem of estimating the variables that may lead organizations to diversify, where each firms take S decisions pertaining to S different activities. This issue is the kind that arises in research investigating the entry of firms into different sectors or different markets. The analysis developed an estimation approach that is able to provide consistent results and can be applied to other contexts where the presence of fixed effects must be considered within a framework of binary dependent variables. The technique was tested on an example of product diversification among Spanish manufacturers where the typical approach has traditionally been to estimate the different decisions independently faced by a firm.

Business Methods, Methods, Management research, Strategic planning (Business)

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Product diversification, performance criteria and compensation at the corporate manager level

Article Abstract:

A test is described of the Galbraith and Nathanson 1978 model of development stages. Nathanson and Galbraith posited that performance criteria are more objective in highly diverse firms, that bonus is a bigger part of total compensation in such companies, and that bonus allocation decisions are tied more to an objective performance formula than to the discretion of CEOs or firm presidents. A comparison of the three variables across high, medium, and low diversification groups is conducted, based on written surveys of Fortune 500 corporate managers in 1,000 manufacturing companies. Some weak support is found for the Galbraith and Nathanson model.

Performance, Usage, Compensation and benefits, Executives, Executive compensation, Wage payment systems, Pay structure

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Diversification: the growing confusion

Article Abstract:

The practice of diversification has been misused and abused by simplifications and generalizations. This shorthanded thinking approach has caused confused terminology, and fundamental principles have been lost. The strategy of diversion is analyzed and the importance of returning to an original process of evaluating an option for payoff is emphasized.

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