Next Article in Journal
Harvesting Large Scale Entanglement in de Sitter Space with Multiple Detectors
Next Article in Special Issue
The KCOD Model on (3,4,6,4) and (34,6) Archimedean Lattices
Previous Article in Journal
Irregularity and Variability Analysis of Airflow Recordings to Facilitate the Diagnosis of Paediatric Sleep Apnoea-Hypopnoea Syndrome
Previous Article in Special Issue
Power-Law Distributions from Sigma-Pi Structure of Sums of Random Multiplicative Processes
 
 
Search for Articles:
Title / Keyword
Author / Affiliation / Email
Journal
Article Type
 
 
Advanced Search
 
Section
Special Issue
Volume
Issue
Number
Page
 
Journals
Entropy
Volume 19
Issue 9
10.3390/e19090448
entropy-logo
Submit to this Journal Review for this Journal Propose a Special Issue
► Article Menu

Article Menu

share Share announcement Help format_quote Cite question_answer Discuss in SciProfiles thumb_up
...
Endorse textsms
...
Comment
first_page
settings
Order Article Reprints
Font Type:
Arial Georgia Verdana
Font Size:
Aa Aa Aa
Line Spacing:
Column Width:
Background:
Article

Assessing the Role of Strategic Choice on Organizational Performance by Jacquemin–Berry Entropy Index

by
Sebastian Ion Ceptureanu
*,
Eduard Gabriel Ceptureanu
and
Irinel Marin
Faculty of Management, The Bucharest University of Economic Studies, 010374 Bucharest, Romania
*
Author to whom correspondence should be addressed.
Entropy 2017, 19(9), 448; https://doi.org/10.3390/e19090448
Submission received: 31 July 2017 / Revised: 24 August 2017 / Accepted: 24 August 2017 / Published: 27 August 2017
(This article belongs to the Special Issue Statistical Mechanics of Complex and Disordered Systems)
Versions Notes

Abstract

:
This paper investigates effects of strategic choice on organizational performance for Romanian family-owned Small and Medium sized Enterprises (SMEs). Using adapted Jacquemin–Berry entropy index for both product and international diversification and using a regression model, our study discusses family involvement as a moderating factor for organizational performance assessment. We discovered that there are multiple interactions between strategic choice and organizational performance while family involvement fails to have a significant role in moderating these interactions.

1. Introduction

The role of strategic choice in terms of diversification [1] on organizational performance has been extensively researched in the literature [2,3,4,5]. However, despite being the subject of many empirical studies, it requires additional empirical tests [6] due to the diversity of results [7] and lack of consensus [6,7,8].
This paper focuses on Small and Medium sized Enterprises (SMEs) and their increasingly more international strategies [9], seeking to use concepts from various scientific disciplines such as econophysics and finance [10,11,12,13], in a similar way with other authors [14,15], to assess organizational performance [16] in connection with diversification as a strategic choice employed by entrepreneurs.
A number of studies argue on the necessity to further investigate not only the diversification–performance relationship but also its moderating factors [17,18,19]. In line with this, our study aims to analyse the relationship between strategic choice in terms of diversification and organizational performance in a specific context, in our case Romanian SMEs operating in the garments and fabrics industry, while considering a moderating factor, family involvement. By including the family involvement, we seek to assess if the impact of this moderating factor affects strategic choice and eventually organizational performance in family-owned SMEs.
Various scholars argue that family involvement may significantly influence strategic decisions of entrepreneurs [3,7,20,21,22,23] toward product diversification [24,25]. Still, there is little knowledge on whether the organizational performance due to diversification varies specifically due to family involvement in SMEs [26,27].
The interest in family involvement is justified by the increasing number and importance of family-owned SMEs in terms of GDP contribution or job creation [28], since such entities are common in the European Union (EU) [29,30,31]. Specificity of family-owned SMEs such as family members’ active involvement in management [7], potential problems due to the conflicts of interest between family members [32,33] provides an interesting setting to explore the relationship between strategic choice and organizational performance [34].
The context of our study is the Romanian garments and fabrics industry, which is interesting in this case due to constant internationalization strategies implemented by SMEs [35], their role in operating on other markets [35] and their impact on performance [36], in spite of problems determined by quality of resources [37]. Another reason is that in this industry there are many family-owned SMEs.
According to our empirical study, the results show a linear relationship between product diversification and organizational performance and an inverted U-shaped relationship between international diversification and organizational performance. Moreover, family involvement seems to negatively influence organizational performance, our findings showing that family SMEs underperform non-family SMEs when engaging in diversification.

2. Theoretical Background and Hypotheses

Scholars have extensively focused on the relationship between product diversification, international diversification and organizational performance considered separately [6,38,39]. However, more studies begin to analyse the effects of both approaches, also [7,40,41,42].
SMEs choosing diversification as a strategic choice may have better results due to positive effects like achieving synergies or gaining economies of scope. As such, both product and international diversification have a positive impact on organizational performance [43,44]. In spite of these benefits, pursuing simultaneously both types of diversification might also lead to a decrease in performance because product or international diversification may require greater coordination [43] due to differences on local conditions [44].
The proponents of less diversification argue that SMEs have fewer resources than larger companies, so are not best suited for it [45] since it is more difficult to gain economies of scale or experience market-related problems [46,47].
On the other hand, SMEs’ organizational flexibility or innovation focus allow them to better develop new products and access new markets [48], aligning their owners’ interests with those of the business [48].

2.1. Product Diversification and Organizational Performance

Even though product diversification-organizational performance relationship has a dedicated stream of research, a general consensus regarding the theoretical and empirical lacks [2,6,49] with both linear [6,50,51] and inverted-U relationships [6,52,53,54].
We choose for our paper the linear approach, which states that the level of diversification is linearly and positively related to organizational performance because SMEs are better to exploit market advantages and capitalize on their increased flexibility.
As such, our first hypothesis is:
Hypothesis 1 (H1).
In SMEs, product diversification-organizational performance relationship has a linear shape.

2.2. International Diversification and Organizational Performance

In the literature, international diversification as a strategic choice regards expansion across the borders of countries into different markets [55,56]. Since Romania is a member of the European Union, international diversification comes as a natural choice for many entrepreneurs willing to access better markets in terms of prices or number of customers. This is the case for the fabrics and garments industry, which has to cope with fierce competition of low-quality cheap prices from Chinese products. On the other hand, many SMEs use lohn as a production system, meaning they manufacture for European retailers.
Level of international diversification is given by the number of different abroad markets in which it operates [7]. For SMEs, the benefits of international diversification include achieving economies of scale, using location-specific advantages [56], better use of their capabilities [57], accessing markets that are not easily accessible in their originating country [58] or gaining competitive advantages [55].
However, international diversification brings additional threats for SMEs since international diversification may require gaining access and integrating different resources and capabilities [57] while facing an increase in coordination costs [7], which may overshadow economies of scale [59,60].
Again, a consensus on the nature of the relationship between international diversification and organizational performance was not achieved [38,55]. The empirical studies found out a wide array of results, from no relationship [42,61], a positive linear [62,63] and negative linear [64], an inverted U-shaped [55,57,65,66] or an S-shaped [38,58] relationship between the two variables. These conflicting results can be explained by diverse performance measures adopted, and methodological settings [67,68,69]. In this study, we decided to investigate the inverted U-shape because it is the most common and also fits our opinion of the nature of relationship. According to the U-shaped relationship, the results are visible up to a point where the costs of coordinating various organizational branches exceeds the benefits [55,66,70,71,72].
As such, our second hypothesis is:
Hypothesis 2 (H2).
In SMEs, international diversification-organizational performance relationship has an inverted U-shape.

2.3. Role of Family Involvement on Product Diversification-Organizational Performance Relationship

Although research on family businesses is comprehensive [31,73,74,75], the moderating role of family involvement in the diversification-organizational performance relationship is controversial [7]. Some scholars argue that family-controlled enterprises tend to be more diversified than non-family ones to reduce financial risks associated with wealth concentration [76], while others strongly oppose [24,26,77], arguing that family businesses engage less in diversification because it threatens familiar socio-emotional wealth, or the specialized assets required represents risks for family control [24]. These conflicting views imply explanations of the phenomenon based on different theoretical approaches and invoke conflicting narratives regarding its antecedents and performance implications [78].
As such, we assume that:
Hypothesis 3 (H3).
For SMEs, family involvement positively influences the relationship between product diversification and organizational performance.

2.4. Role of Family Involvement on International Diversification–Performance Relationship

In the literature, there are conflicting theoretical and empirical findings regarding actual effects of international expansion on family business [79]. Some scholars [24] suggest that family enterprises internationalize less than non-family SMEs due to management’s desire to retain familial control and ensure socio-emotional wealth [24], avoid international operations due to the costs and complexity associated with managing geographically dispersed operations [80] or due to the lack of professional managers with specialized international skills [78].
Others, [81,82,83] on the contrary, argue that, due to their access to capital, international orientation for family-owned SMEs is comparable to non-family businesses with similar features or demonstrated the positive effects of family involvement on internationalization [82,84]. Consequently, the impact of family involvement on the international diversification-organizational performance is controversial.
As such, we assume that:
Hypothesis 4 (H4).
Family involvement positively influences international diversification-organizational performance relationship.

3. Methods

3.1. Sample and Data Collection

We test the theoretical model by using a sample of Romanian SMEs operating in the fabrics and garments industry. Data concerning the model variables have been extracted from companies’ reports available at the Romanian Finance Ministry over a five-year time period (2011–2016).
The initial selection of SMEs was based on 4 criteria:
(a) 
all selected companies have to operate in fabrics and garments as their main activity (at least 50% of their turnover).
(b) 
all selected companies have to be SMEs. We consider EU recommendation 2003/361, classifying companies as medium-sized, small and micro (see Table 1).
(c) 
localization. We wanted to cover all of Romania’s development regions (South-East, South, South-West, West, Bucharest–Ilfov, North-East, North-West and Center).
(d) 
family involvement, where it was the case. To ensure this, two criteria had to be met: the managing entrepreneur has to be a member of the family which owns the company and the entrepreneur and other family members have to own more than 50% of the business in terms of social capital.
(e) 
exports. To be eligible for the sample, the company has to export its products. We do not set up a limit for exports.
Questionnaires were administered to 108 SMEs. In the end, we had 58 valid questionnaires, resulting in a 53.7 response rate. The sample structure is shown in Table 2.

3.2. Variables

3.2.1. Dependent Variable

In our study, dependent variable was Organizational performance. While previous studies have considered diverse measures for it, usually accounting-based and market-based measures [6], we choose a measure of financial performance [7,39,40,85], namely return on sales (RoS) [4,6,47], due to availability and capacity to serve our purpose.

3.2.2. Control Variables

We considered three control variables: Size, Age and Localization. While the first two are common control variables, Localization addresses the geographical distribution of SMEs in terms of development regions. Romania has 8 development regions (see Table 2) and we wish to investigate whether the location of headquarters influences results.

3.2.3. Dependent Variables

We considered two explanatory variables, Product diversification and International diversification.
In order to measure Product diversification, we used the Jacquemin–Berry entropy index [86], a well-documented measure for diversification studies. As such, the entropy index takes into consideration two elements of diversification [87]: the number of segments in which a SME operates and the relative importance of each of the segments in the total sales of that SME [7].
According to Palepu [87], the Jacquemin–Berry entropy measure is based on three elements: (1) the number of product segments in which the business operates; (2) the distribution of the business’s total sales across the segments; and (3) the degree of relatedness among the various product segments. What distinguishes the Jacquemin–Berry entropy index from other diversification indices is its ability to consider the third element [87]. Because of this, the entropy measure overcomes the limitation of the earlier diversification indices.
For Product diversification, the entropy measure of diversification was defined as:
If yj are total sales of an SME in a segment j, j = 1, …, m,
Then,
∑yj = Y represents the total sales of SME
and
pj = (pj/Y) represent the quota of the sales in a segment j
Thus,
P r o d u c t   d i v e r s i f i c a t i o n = ∑ j = 1 m p j   ln   ( 1 / p j )
As such, the entropy index is null when the SME recorded no product diversification and is equal to ln n in case its sales are equally distributed among n segments.
Using a similar theoretical rationale, International diversification was measured by using the same entropy index. As such,
I n t e r n a t i o n a l   d i v e r s i f i c a t i o n   =   ∑ j = 1 m p i   ln   ( 1 / p j )
where m represents the number of international markets in which the SME operates and pj is the share of its international segment in SME total sales.
This measure takes into account both the number of international markets in which a SME operates and the relative importance of each international market over total sales. The entropy index is null when the SME has no international diversification and is equal to ln n in case its sales are equally distributed among n international markets. Jacquemin–Berry entropy index is extensively used in similar studies [7,88,89].
Finally, in our study moderator variables was considered Family involvement. In this case, we encountered some methodological problems since there is a lack of consensus in the literature on the level of ownership that constitutes family influence [90]. Hence, we decided to consider a rather restrictive approach by mixing two criteria: the managing entrepreneur has to be a member of the family which owns the company, which is in line with other studies [7,90] and the entrepreneur and other family members have to own more than 50% of the business, which is well above restrictions from other studies [7,91].

4. Analysis and Results

4.1. Testing the Variables

First, we tested variables’ normality of distributions and examined the skewness and kurtosis. For the hypotheses testing, a fixed-effects panel data regression model was used (see Table 3).
Variance inflation factors (VIF) and a linear dependency test were used to test for collinearity [92]. Since none of the VIF scores exceed 10, the commonly accepted threshold for indicating a potential problem, these results confirm that multicollinearity is not a problem for the model.

4.2. Testing the Hypothesis

First, we tested the control variables and the results show that SMEs’ Size and Localization are positively and significantly related to Organizational performance, while Age does not influence it. (See Table 4).
Then, we further introduced strategic choice represented by Product diversification and International diversification as well as the moderator variable, Family involvement (See Table 5).
Our first hypothesis was that of H1. In SMEs, product diversification-organizational performance relationship has a linear shape. The results show a positive and significant relationship between Product diversification and Organizational performance; however, Product diversification squared has a negative and insignificant influence on Organizational performance. As such, the first hypothesis is confirmed, there is a linear relationship between Product diversification and Organisational performance. This is in line with other similar studies [7,93].
The second hypothesis was that of H2. In SMEs, international diversification-organizational performance relationship has an inverted U-shape. Regarding International diversification, the results show a positive and significant relationship between it and Organizational performance, and a negative and significant relationship between International diversification squared and Organizational performance. These results confirmed the second hypothesis, as well.
Family involvement is positively and significantly related to Organizational performance, indicating that SMEs characterized by family involvement are able to perform better than SMEs with no family involvement (See Table 6).
Finally, at the end we added the interaction between variables (See Table 7).
Once we introduced the interactions between variables, we tested the last 2 hypotheses.
The third one stated that H3. For SMEs, family involvement positively influences the relationship between product diversification and organizational performance. The results showed that Family involvement negatively moderates Organizational performance on both Product diversification and International diversification. In fact, the interaction between Product diversification and Family involvement exerts a negative and statistically significant influence on Organizational performance. Hence, this hypothesis is rejected.
Finally, the last hypothesis was H4. Family involvement positively influences international diversification-organizational performance relationship. In this case, also, the interaction between International diversification and Family involvement exerts a negative and statistically significant influence on Organizational performance. As such, this hypothesis is rejected, also.

5. Discussion and Conclusions

Our study found out a linear relationship between product diversification and performance, in line with similar studies [6,7]. In our opinion, since many SMEs operating in this specific industry have specific assets, this is a rather natural conclusion. Diversification may allow the entrepreneur to exploit these resources that would otherwise prove less effective.
Regarding the effect of international diversification on organizational performance, our study confirms the theoretical assumption discovering an inverted U-shaped relationship. This result is consistent with most management literature on the topic [7,55] and suggests that early efforts to diversify internationally are often positive as they can produce economies of scale.
An interesting conclusion is that family involvement has a significant negative moderating effect on organizational performance, contradicting with results of other studies on the topic [26,94]. In our opinion, reluctance to diversify for family-owned SMEs is motivated by the desire to reduce uncertainties and risks associated with diversification and willingness to protect the socio-emotional benefits of family members. Other scholars argue that this leads family-owned SMEs to minimize HR investments, which is an essential asset for successful diversification [7].
This study contributes to both management theory and practice in several ways.
First, it makes a contribution to entropy literature in terms of using specific entropy index—in our case the Jacquemin–Berry index—to analyse the relationship between strategic choice and organizational performance. Simultaneously, it contributes to the family business literature on strategic choice in family SMEs in terms of diversification pathways [24,25].
Secondly, by providing empirical evidence we extend diversification-organizational performance research by testing it in an unexplored context, and by assessing the role of an interesting moderating factor, family involvement.
Finally, from a pragmatic perspective, we provide useful suggestions for entrepreneurs concerning how to run their business in terms of diversification choices and what are the most appropriate ways to do it.
Despite these contributions, the study has some limitations. First, the results are limited to manufacturing SMEs in a specific context, Romania, and a very specific industry, fabrics and garments. Secondly, the small sample size and the focus on SMEs may reduce generalizability of the results. Thirdly, accessibility in terms of data limitations was a problem. This led us to use only one organizational performance indicator—Return on Sales—instead of several. It also determined that our panel only cover a five-year time period.

Author Contributions

This article was originally conceived and designed by Sebastian Ion Ceptureanu, Eduard Gabriel Ceptureanu and Irinel Marin, who also wrote the paper. All authors approved the final manuscript.

Conflicts of Interest

The authors declare no conflict of interest.

References

  1. Laso, J.; Margallo, M.; Fullana, P.; Bala, A.; Gazulla, C.; Irabien, Á.; Aldaco, R. When product diversification influences life cycle impact assessment: A case study of canned anchovy. Sci. Total Environ. 2017, 581–582, 629–639. [Google Scholar] [CrossRef]
  2. Benito-Osorio, D.; Ángel Guerras-Martín, L.; Ángel Zuñiga-Vicente, J. Four decades of research on product diversification: A literature review. Manag. Decis. 2012, 50, 325–344. [Google Scholar] [CrossRef]
  3. Saghi-Zedek, N. Product diversification and bank performance: Does ownership structure matter? J. Bank. Financ. 2016, 71, 154–167. [Google Scholar] [CrossRef]
  4. Muñoz-Bullón, F.; Sanchez-Bueno, M.J. Is there new evidence to show that product and international diversification influence SMEs’ performance? EuroMed J. Bus. 2011, 6, 63–76. [Google Scholar] [CrossRef]
  5. Li, Q.; Wang, W.; Lou, Y.; Cheng, K.; Yang, X. Diversification and Corporate Performance: Evidence from China’s Listed Energy Companies. Sustainability 2016, 8, 983. [Google Scholar] [CrossRef]
  6. Palich, L.E.; Cardinal, L.B.; Miller, C.C. Curvilinearity in the diversification performance linkage: An examination of over three decades of research. Strateg. Manag. J. 2000, 21, 155–174. [Google Scholar] [CrossRef]
  7. Delbufalo, E.; Poggesi, S.; Borra, S. Diversification, family involvement and firm performance. Empirical evidence from Italian manufacturing firms. J. Manag. Dev. 2016, 35, 663–680. [Google Scholar] [CrossRef]
  8. Park, K.; Jang, S.S. Effects of within-industry diversification and related diversification strategies on firm performance. Int. J. Hosp. Manag. 2013, 34, 51–60. [Google Scholar] [CrossRef]
  9. Miskiewicz, J.; Ausloos, M. Has the world economy reached its globalization limit? Physica A 2010, 389, 797–806. [Google Scholar] [CrossRef]
  10. Ausloos, M.; Jovanovic, F.; Schinckus, C. On the “usual” misunderstandings between econophysics and finance: Some clarifications on modelling approaches and efficient market hypothesis. Int. Rev. Financ. Anal. 2016, 47, 7–14. [Google Scholar] [CrossRef]
  11. Jovanovic, F.; Schinckus, C. Breaking down the barriers between econophysics and financial economics. Int. Rev. Financ. Anal. 2016, 47, 256–266. [Google Scholar] [CrossRef]
  12. Gurjeet, D.; Ausloos, M. Modelling and measuring the irrational behavior of agents in financial markets: Discovering the psychological soliton. Chaos Solitons Fractals 2016, 88, 119–125. [Google Scholar]
  13. Jianu, I.; Jianu, I.; Ileanu, B.V.; Nedelcu, M.; Herțeliu, C. The Value Relevance of Financial Reporting in Romania. J. Econ. Comput. Econ. Cybern. Stud. Res. 2014, 4, 167–182. [Google Scholar]
  14. Ausloos, M.; Castellano, R.; Cerqueti, R. Regularities and discrepancies of credit default swaps: A data science approach through Benford’s law. Chaos Solitons Fractals 2016, 90, 8–17. [Google Scholar] [CrossRef]
  15. Varela, L.M.; Rotundo, G. Complex Network Analysis and Nonlinear Dynamics. In Complex Networks and Dynamics; Springer International Publishing: Berlin, Germany, 2016; pp. 3–25. [Google Scholar]
  16. Bartolacci, F.; Castellano, N.G.; Cerqueti, R. The impact of innovation on companies’ performance: An entropy-based analysis of the STAR market segment of the Italian Stock Exchange. Technol. Anal. Strateg. Manag. 2015, 27, 102–123. [Google Scholar] [CrossRef]
  17. Chakrabarti, A.; Singh, K.; Mahmood, I. Diversification and performance: Evidence from East Asian firms. Strateg. Manag. J. 2007, 28, 101–120. [Google Scholar] [CrossRef]
  18. Denis, D.J.; Denis, D.K.; Yost, K. Global diversification, industrial diversification, and firm value. J. Financ. 2002, 57, 1951–1979. [Google Scholar] [CrossRef]
  19. Mayer, M.; Whittington, R. Diversification in context: A cross-national and cross temporal extension. Strateg. Manag. J. 2003, 24, 773–781. [Google Scholar] [CrossRef]
  20. Hernández-Trasobares, A.; Galve-Górriz, C. The influence of family control on decisions regarding the specialization and diversification of business groups. BRQ Bus. Res. Q. 2016, 19, 73–89. [Google Scholar] [CrossRef]
  21. Hernández-Trasobares, A.; Galve-Górriz, C. Diversification and family control as determinants of performance: A study of listed business groups. Eur. Res. Manag. Bus. Econ. 2017, 23, 46–54. [Google Scholar] [CrossRef]
  22. Muñoz-Bullón, F.; Sánchez-Bueno, M.J. Do family ties shape the performance consequences of diversification? Evidence from the European Union. J. World Bus. 2012, 47, 469–477. [Google Scholar] [CrossRef]
  23. González-Cruz, T.F.; Cruz-Ros, S. When does family involvement produce superior performance in SME family business? J. Bus. Res. 2016, 69, 1452–1457. [Google Scholar] [CrossRef]
  24. Gómez-Mejía, L.R.; Makri, M.; Larraza-Kintana, M. Diversification decisions in family controlled firms. J. Manag. Stud. 2010, 48, 223–252. [Google Scholar] [CrossRef]
  25. Jones, C.D.; Makri, M.; Gómez-Mejía, L.R. Affiliate directors and perceived risk bearing in publicly traded, family-controlled firms: The case of diversification. Entrep. Theory Pract. 2008, 32, 1007–1026. [Google Scholar] [CrossRef]
  26. Anderson, R.C.; Reeb, D.M. Founding-family ownership, corporate diversification, and firm leverage. J. Law Econ. 2003, 46, 653–684. [Google Scholar] [CrossRef]
  27. Thomsen, S.; Pedersen, T. Ownership structure and economic performance in the largest European companies. Strateg. Manag. J. 2000, 21, 689–705. [Google Scholar] [CrossRef]
  28. Ceptureanu, S.I. Competitiveness of SMEs. Bus. Excell. Manag. Rev. 2015, 5, 55–67. [Google Scholar]
  29. Faccio, M.; Lang, L.H. The ultimate ownership of Western European corporations. J. Financ. Econ. 2002, 65, 365–395. [Google Scholar] [CrossRef]
  30. La Porta, R.; Lopez-de-Silanes, F.; Shleifer, A.; Vishny, R. The quality of government. J. Law Econ. Organ. 1999, 15, 222–279. [Google Scholar] [CrossRef]
  31. Ceptureanu, E.G. Resilience in Romanian Small Family Businesses. J. Appl. Quant. Methods 2015, 10, 68–73. [Google Scholar]
  32. Villalonga, B.; Amit, R. How do family ownership, control and management affect firm value? J. Financ. Econ. 2006, 80, 385–417. [Google Scholar] [CrossRef]
  33. Young, M.N.; Peng, M.W.; Ahlstrom, D.; Bruton, G.D.; Jiang, Y. Corporate governance in emerging economies: A review of the principal-principal perspective. J. Manag. Stud. 2008, 45, 196–220. [Google Scholar] [CrossRef]
  34. Tsao, S.; Lien, P. Family management and internationalization: The impact on firm performance and innovation. Manag. Int. Rev. 2013, 53, 189–213. [Google Scholar] [CrossRef]
  35. Popescu, I.D. Green fashion—A new possible lifestyle for Romanians. Ind. Text. 2013, 64, 46–54. [Google Scholar]
  36. Ceptureanu, S.I.; Ceptureanu, E.G.; Visileanu, E. Comparative analysis of small and medium enterprises organizational performance in clothing industry. Ind. Text. 2017, 68, 156–162. [Google Scholar]
  37. Popescu, I.D. The correspondence between workforce skills and company needs. Ind. Text. 2013, 64, 168–175. [Google Scholar]
  38. Contractor, F.J.; Kundu, S.K.; Hsu, C.C. A three-stage theory of international expansion: The link between multinationality and performance in the service sector. J. Int. Bus. Stud. 2003, 34, 5–18. [Google Scholar] [CrossRef]
  39. Kim, H.; Hoskisson, R.E.; Wan, W.P. Power dependence, diversification strategy, and performance in keiretsu member firms. Strateg. Manag. J. 2004, 25, 613–636. [Google Scholar] [CrossRef]
  40. Geringer, J.M.; Tallman, S.; Olsen, D.M. Product and international diversification among Japanese multinational firms. Strateg. Manag. J. 2000, 21, 51–80. [Google Scholar] [CrossRef]
  41. Hitt, M.A.; Tihanyi, L.; Miller, T.; Connelly, B. International diversification: Antecedents, outcomes, and moderators. J. Manag. 2006, 32, 831–867. [Google Scholar] [CrossRef]
  42. Tallman, S.; Li, J. Effects of international diversity and product diversity on the performance of multinational firms. Acade. Manag. J. 1996, 39, 179–196. [Google Scholar] [CrossRef]
  43. Chang, S.C.; Wang, C.F. The effect of product diversification strategies on the relationship between international diversification and firm performance. J. World Bus. 2007, 42, 61–79. [Google Scholar] [CrossRef]
  44. Delios, A.; Beamish, P.W. Geographic scope, product diversification, and the corporate performance of Japanese firms. Strateg. Manag. J. 1999, 20, 711–727. [Google Scholar] [CrossRef]
  45. Lu, J.W.; Beamish, P.W. Partnering strategies and performance of SME’s international joint ventures. J. Bus. Ventur. 2006, 21, 461–486. [Google Scholar] [CrossRef]
  46. Westhead, P.; Wright, M.; Ucbasaran, D. Internationalization of new and small firms: A resource based-view. J. Bus. Ventur. 2001, 16, 333–358. [Google Scholar] [CrossRef]
  47. Lu, J.W.; Beamish, P.W. The internationalization and performance of SMEs. Strateg. Manag. J. 2001, 22, 565–586. [Google Scholar] [CrossRef]
  48. Pett, T.L.; Wolff, J.A. SME performance: A case of internal consistency. J. Small Bus. Strateg. 2007, 18, 1–16. [Google Scholar]
  49. Purkayastha, S.; Manolova, T.S.; Edelman, L.F. Diversification and performance in developed and emerging market contexts: A review of the literature. Int. J. Manag. Rev. 2012, 14, 18–38. [Google Scholar] [CrossRef]
  50. Berger, P.G.; Ofek, E. Diversification’s effect on firm value. J. Financ. Econ. 1995, 37, 39–65. [Google Scholar] [CrossRef]
  51. Servaes, H. The value of diversification during the conglomerate merger wave. J. Financ. 1996, 51, 1201–1225. [Google Scholar] [CrossRef]
  52. Kistruck, G.M.; Qureshi, I.; Beamish, P.W. Geographic and product diversification in charitable organizations. J. Manag. 2011, 39, 496–530. [Google Scholar] [CrossRef]
  53. Li, J.; Yue, D.R. Market size, legal institutions, and international diversification strategies: Implications for the performance of multinational firms. Manag. Int. Rev. 2008, 48, 667–688. [Google Scholar] [CrossRef]
  54. Benito-Osorio, D.; Colino, A.; Zúñiga-Vicente, J.Á. The link between product diversification and performance among Spanish manufacturing firms: Analyzing the role of firm size. Can. J. Adm. Sci. 2015, 32, 58–72. [Google Scholar] [CrossRef]
  55. Hitt, M.A.; Hoskisson, R.E.; Kim, H. International diversification: Effects on innovation and firm performance in product-diversified firms. Acad. Manag. J. 1997, 40, 767–798. [Google Scholar] [CrossRef]
  56. Kim, Y.S.; Mathur, I. The impact of geographic diversification on firm performance. Int. Rev. Financ. Anal. 2008, 17, 747–766. [Google Scholar] [CrossRef]
  57. Qian, G.; Khoury, T.A.; Peng, M.W.; Qian, Z. The performance implications of intra-and inter-regional geographic diversification. Strateg. Manag. J. 2010, 31, 1018–1030. [Google Scholar] [CrossRef]
  58. Lu, J.W.; Beamish, P.W. International diversification and firm performance: The S-curve hypothesis. Acad. Manag. J. 2004, 47, 598–609. [Google Scholar] [CrossRef]
  59. Roth, K. International configuration and coordination archetypes for medium-sized firms in global industries. J. Int. Bus. Stud. 1992, 23, 533–549. [Google Scholar] [CrossRef]
  60. Roth, K.; Schweiger, D.M.; Morrison, A.J. Global strategy implementation at the business unit level: Operational capabilities and administrative mechanisms. J. Int. Bus. Stud. 1991, 22, 369–402. [Google Scholar] [CrossRef]
  61. Qian, G. Multinationality, product diversification, and profitability of emerging US small- and medium-sized enterprises. J. Bus. Ventur. 2002, 17, 611–633. [Google Scholar] [CrossRef]
  62. Kim, W.C.; Hwang, P.; Burgers, W.P. Multinationals’ diversification and the risk-return trade-off. Strateg. Manag. J. 1993, 14, 275–286. [Google Scholar] [CrossRef]
  63. Kogut, B. Designing global strategies: Comparative and competitive value added chains. Sloan Manag. Rev. 1985, 26, 15–28. [Google Scholar]
  64. Click, R.W.; Harrison, P. Does Multinationality Matter? Evidence of Value Destruction in US Multinational Corporations; Working Paper; George Washington University: Washington, DC, USA, 2000. [Google Scholar]
  65. Li, L.; Qian, G. Dimensions of international diversification: Their joint effects on firm performance. J. Glob. Mark. 2005, 18, 7–35. [Google Scholar] [CrossRef]
  66. Gomes, L.; Ramaswamy, K. An empirical examination of the form of the relationship between multinationality and performance. J. Int. Bus. Stud. 1999, 30, 173–187. [Google Scholar] [CrossRef]
  67. Hennart, J.-F. The theoretical rationale for a multinationality-performance relationship. Manag. Int. Rev. 2007, 47, 423–452. [Google Scholar] [CrossRef]
  68. Verbeke, A.; Brugman, P. Triple-testing the quality of multinationality-performance research: An internalization theory perspective. Int. Bus. Rev. 2009, 18, 265–275. [Google Scholar] [CrossRef]
  69. Verbeke, A.; Li, A.P.L. Toward more effective research on the multinationality performance relationship. Manag. Int. Rev. 2009, 49, 149–161. [Google Scholar] [CrossRef]
  70. Geringer, M.; Beamish, P.W.; DaCosta, R.C. Diversification strategy and internationalization: Implications for MNE performance. Strateg. Manag. J. 1989, 10, 109–119. [Google Scholar] [CrossRef]
  71. Sullivan, D. The ‘threshold of internationalization’: Replication, extension, and reinterpretation. MIR: Manag. Int. Rev. 1994, 34, 165–186. [Google Scholar]
  72. Fang, Y.; Wade, M.; Delios, A.; Beamish, P.W. International diversification, subsidiary performance, and the mobility of knowledge resources. Strateg. Manag. J. 2007, 28, 1053–1064. [Google Scholar] [CrossRef]
  73. Bauweraerts, J.; Colot, O. Exploring nonlinear effects of family involvement in the board on entrepreneurial orientation. J. Bus. Res. 2017, 70, 185–192. [Google Scholar] [CrossRef]
  74. Dawson, A.; Mussolino, D. Exploring what makes family firms different: Discrete or overlapping constructs in the literature? J. Fam. Bus. Strateg. 2014, 5, 169–183. [Google Scholar] [CrossRef]
  75. Gómez-Mejía, L.R.; Haynes, K.; Nunez-Nickel, M.; Jacobson, K.; Moyano-Fuentes, J. Socioemotional wealth and business risks in family controlled firms: Evidence from Spanish olive oil mills. Adm. Sci. Q. 2007, 52, 106–137. [Google Scholar] [CrossRef]
  76. Amihud, Y.; Lev, B. Does corporate ownership structure affect its strategy towards diversification? Strateg. Manag. J. 1999, 20, 1063–1069. [Google Scholar] [CrossRef]
  77. Wiseman, R.M.; Gómez-Mejía, L.R. A behavioral agency model of managerial risk taking. Acad. Manag. Rev. 1998, 23, 133–153. [Google Scholar]
  78. Van Essen, M.; Carney, M.; Gedajlovic, E.R.; Heugens, P.P. How does family control influence firm strategy and performance? A meta-analysis of US publicly listed firms. Corp. Gov.: Int. Rev. 2015, 23, 3–24. [Google Scholar] [CrossRef]
  79. Pukall, T.J.; Calabrò, A. The internationalization of family firms a critical review and integrative model. Fam. Bus. Rev. 2014, 27, 103–125. [Google Scholar] [CrossRef]
  80. Fernández, Z.; Nieto, M.J. Internationalization strategy of small and medium-sized family businesses: Some influential factors. Fam. Bus. Rev. 2005, 18, 77–89. [Google Scholar] [CrossRef]
  81. Carr, C.; Bateman, S. International strategy configurations of the world’s top family firms. Manag. Int. Rev. 2009, 49, 733–758. [Google Scholar] [CrossRef]
  82. Zahra, S.A. International expansion of US manufacturing family businesses: The effect of ownership and involvement. J. Bus. Ventur. 2003, 18, 495–512. [Google Scholar] [CrossRef]
  83. Claver, E.; Rienda, L.; Quer, D. Family firm’s international commitment. The influence of family-related factors. Fam. Bus. Rev. 2009, 22, 125–135. [Google Scholar] [CrossRef]
  84. Miller, D.; Le Breton-Miller, I. Lessons in Competitive Advantage from Great Family Businesses; Harvard Business School Press: Cambridge, MA, USA, 2005. [Google Scholar]
  85. Colpan, A.M. Dynamic effects of product diversity, international scope and keiretsu membership on the performance of Japan’s textile firms in the 1990s. Asian Bus. Manag. 2006, 5, 419–445. [Google Scholar] [CrossRef]
  86. Jacquemin, A.P.; Berry, C.H. Entropy measure of diversification and corporate growth. J. Ind. Econ. 1979, 27, 359–369. [Google Scholar] [CrossRef]
  87. Palepu, K. Diversification strategy, profit performance, and the entropy measure. Strateg. Manag. J. 1985, 6, 239–255. [Google Scholar] [CrossRef]
  88. Hoopes, D.G. Measuring Geographic Diversification and Product Diversification. Manag. Int. Rev. 1999, 39, 277–292. [Google Scholar]
  89. Makarfi Ibrahim, Y.; Makarfi Ibrahim, A.; Kabir, B. Geographic diversification, performance, and the risk profile of UK construction firms. J. Eng. Des. Technol. 2009, 7, 171–185. [Google Scholar] [CrossRef]
  90. Sirmon, D.G.; Gove, S.; Hitt, M.A. Resource management in dyadic competitive rivalry: The effects of resource bundling and deployment. Acad. Manag. J. 2008, 51, 919–935. [Google Scholar] [CrossRef]
  91. Calabro, A.; Torchia, M.; Pukall, T.; Mussolino, D. The influence of ownership structure and board strategic involvement on international sales: The moderating effect of family involvement. Int. Bus. Rev. 2013, 22, 509–523. [Google Scholar] [CrossRef]
  92. Neter, J.; Wasserman, N.; Kutner, M.H. Applied Linear Statistical Models: Regression, Analysis of Variance and Experimental Designs; Irwin: Homewood, IL, USA, 1985. [Google Scholar]
  93. Tastan Boz, I.; Yigit, I.; Anil, I. The Relationship between Diversification Strategy and Organizational Performance: A Research Intented for Comparing Belgium and Turkey. Procedia Soc. Behav. Sci. 2013, 99, 997–1006. [Google Scholar]
  94. Yoo, T.; Jung, D.K. Corporate governance change and performance: The roles of traditional mechanisms in France and South Korea. Scand. J. Manag. 2015, 31, 40–53. [Google Scholar] [CrossRef]
Table
Table 1. SMEs classification.
Table 1. SMEs classification.
Company CategoryStaff HeadcountTurnover
Medium-sized<250≤€50 m
Small<50≤€10 m
Micro<10≤€2 m
Table
Table 2. Sample structure.
Table 2. Sample structure.
CharacteristicsShare in the Sample%
Localization (Development Region)South-East12.07%
South8.62%
South-West1.72%
West20.69%
Bucharest-Ilfov31.03%
North-East5.17%
North-West1.72%
Center18.97%
SME size (no. employees)Micro (<10)31.03%
Small (10–49)39.66%
Medium (50–249)29.31%
SME age (years from establishment)Less than 5 years old24.14%
5–10 years old34.48%
10–15 years old25.86%
More than 15 years old15.52%
Table
Table 3. Correlation coefficients between variables.
Table 3. Correlation coefficients between variables.
1.Organizational performance: RoS1
2.Size of SME0.217 *1
3.Age of SME0.094 *0.342 *1
4.Localization0.061−0.066−0.1061
5.Product diversification0.0080.104 *0.013−0.0061
6.Product diversification squared−0.0000.034−0.0040.0000.9541
7.International diversification0.2500.2900.149−0.1310.2270.2111
8.International diversification squared0.2020.2560.131 *−0.103 *0.195 *0.187 *0.962 *1
9.Family involvement0.093 *−0.132 *0.088 *0.192 *−0.080 *−0.088 *−0.055−0.067 *1
10.Product diversification × Family involvement0.033−0.097 *0.0380.062 *0.317 *0.284 *0.102 *0.076 *0.809 *1
11.International diversification × Family involvement0.087 *−0.0420.112 *0.0090.099 *0.0670.352 *0.337 *0.754 *0.718 *1
Note: * Denotes 10 per cent significant correlations.
Table
Table 4. Influence of SMEs’ size, age and localization on organizational performance.
Table 4. Influence of SMEs’ size, age and localization on organizational performance.
Variables
Size of SME1.26 ***
Age of SME0.02
Localization0.73 *
συ0.096
σε0.216
Ρ0.166
Wald χ232.89
Prob > χ20.000
N58
Note: p = p-value; * p < 0.10; *** p < 0.001; N = 58.
Table
Table 5. Influence of strategic choice on organizational performance, moderated by family involvement.
Table 5. Influence of strategic choice on organizational performance, moderated by family involvement.
Variables
Size of SME1.01 ***
Age of SME−0.01
Localization0.79 *
Product diversification2.25
Product diversification squared2.49
International diversification4.55 ***
International diversification squared−7.12 **
Family involvement2.21 **
συ0.182
σε0.383
Ρ0.219
Wald χ283.98
Prob > χ20.000
N58
Note: p = p-value ; * p < 0.10; ** p < 0.05; *** p < 0.001; N = 58.
Table
Table 6. Differences in organizational performance for family and non-family SMEs.
Table 6. Differences in organizational performance for family and non-family SMEs.
TotalFamily SMENon-Family SMEt-TestSig.
RoS2.5693.6931.598−2.324**
Product diversification0.2830.2750.2731.944**
International diversification0.5260.3230.3131.282
Number of observations582632
Note: Standard deviations in parentheses. ** p < 0.05.
Table
Table 7. Influence of strategic choice on organizational performance, moderated by family involvement, with interaction between variables.
Table 7. Influence of strategic choice on organizational performance, moderated by family involvement, with interaction between variables.
Variables
Size of SME0.79 **
Age of SME−0.01
Localization0.53 *
Product diversification9.42 *
Product diversification squared−6.35
International diversification8.94 ***
International diversification squared−7.74 **
Family involvement3.53 ***
Product diversification × Family involvement−8.33 **
International diversification × Family involvement−1.09 ***
συ0.621
σε0.928
Ρ0.332
Wald χ2117.21
Prob > χ20.000
N58
Note: p = p-value; * p < 0.10; ** p < 0.05; *** p < 0.001; N = 58.

Share and Cite

MDPI and ACS Style

Ceptureanu, S.I.; Ceptureanu, E.G.; Marin, I. Assessing the Role of Strategic Choice on Organizational Performance by Jacquemin–Berry Entropy Index. Entropy 2017, 19, 448. https://doi.org/10.3390/e19090448

AMA Style

Ceptureanu SI, Ceptureanu EG, Marin I. Assessing the Role of Strategic Choice on Organizational Performance by Jacquemin–Berry Entropy Index. Entropy. 2017; 19(9):448. https://doi.org/10.3390/e19090448

Chicago/Turabian Style

Ceptureanu, Sebastian Ion, Eduard Gabriel Ceptureanu, and Irinel Marin. 2017. "Assessing the Role of Strategic Choice on Organizational Performance by Jacquemin–Berry Entropy Index" Entropy 19, no. 9: 448. https://doi.org/10.3390/e19090448

APA Style

Ceptureanu, S. I., Ceptureanu, E. G., & Marin, I. (2017). Assessing the Role of Strategic Choice on Organizational Performance by Jacquemin–Berry Entropy Index. Entropy, 19(9), 448. https://doi.org/10.3390/e19090448

Note that from the first issue of 2016, this journal uses article numbers instead of page numbers. See further details here.

Article Metrics

Back to TopTop