Global diversification, profitability and revenue creation: Evidence from an emerging economY

Vasanthan, Subramaniam and Shaista, Wasiuzzaman and Mosharrof, Hosen and Evan, Lau (2024) Global diversification, profitability and revenue creation: Evidence from an emerging economY. Business Strategy and Development. pp. 1-13. ISSN 2572-3170

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Abstract

The aim of this article is to examine the impact of global diversification on firm per�formance. Data for this study were gathered from a total of 714 firms over a period of 5 years, from 2016 to 2020, totalling 2904 firm-year observations. The relation�ship between global diversification and firm performance is analysed using ordinary least square (OLS) and quantile regression (QR) approaches. Based on OLS regres�sion, global diversification negatively influences both the ability to create revenue and generate profits, with significant evidence only for revenue. On the other hand, QR analysis presents various perspectives of the relationship. Although global diversi�fication is still negatively associated with the profitability of under-performing firms, the relationship can be positive once the firms begin to perform well. In terms of rev�enue creation, its association with global diversification is found to be significantly negative for all levels of revenue. This demonstrates how global diversification can provide a distinctive platform for firms to generate profits even though their ability to make revenue decreases as their performance improves. Policy implications are discussed accordingly.

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