서강대학교

초록/요약

Traditionally, Korea companies have used 'diversification' as a main management strategy. The diversification is found that it affects the value of firm through various channels. From among these, this paper focuses on productivity and examines the effects of diversification. This paper defined the diversification based on production classification and according to 3_digit KSIC code, classifies a firm that operating more than two businesses as a diversified firm. As for indices of diversification, this paper used specialization index, Berry-Herfindahl Index, and related and unrelated entropy index. Also I measured the productivity of firms based on total factor productivity as well as labor productivity. The preliminary regression results show that diversification of firm operation has a negative effect on labor productivity as well as on total factor productivity. This results support a hypothesis that the diversification destroy a firm's value. Using entropy index as a proxy for diversification, I found that unrelated diversification has a negative effect on productivity, related diversification, however, has no significant relation with productivity. This implies the economy of scope is dominant in related diversification, while the increased inefficiencies of operation becomes a costly burden in unrelated diversification. The result of this study suggests that it is better to strengthen firm's substances through specialization rather than excessive diversification. Therefore government should establish a policy which induces the specialization of firms. Moreover, when an individual firm's diversification is impossible due to decline of the industry, government should lead a firm's diversification to relating industry.