Chinese Management Studies

Purpose – The purpose of this paper is to provide a systematic comparison of the level of business diversification in China and eight other large economies for the 2001-2005 period. The reasons why publicly listed Chinese firms are more diversified than companies elsewhere are investigated.

Design/methodology/approach – Data were collected on the number of business segments in which publicly traded companies operate from the Thomson One Banker database and analyzed using non-parametric tests and regression analysis.

Findings – The mean number of business segments per firm varies significantly by country. Notably, there is no evidence in the authors' sample that emerging-market companies are systematically more diversified than their developed-market counterparts. In most countries, firms have become less diversified over time. However, there is no such trend in China. The level of diversification of Chinese enterprises does not vary over the authors' study period (2001-2005), making Chinese firms the most diversified in the sample by 2005. China's growth rate does not seem to explain the higher level of firm diversification. However, the authors find that Chinese state-owned enterprises (SOEs) diversify their operations more aggressively than other Chinese firms.

Research limitations/implications – Ownership data and business group affiliations were not available for all firms in the sample, making it difficult to control for these effects across economies. The study's findings are limited to publicly traded firms.

Practical implications – Government involvement in SOEs may be contributing to a divergence in the pattern of business diversification between China and other economies.

Originality/value – This paper quantifies anecdotal evidence that Chinese firms are more diversified than similar firms in other countries.