Efficiency or bounded rationality? Drivers of firm diversification strategies in Vietnam

摘要: Considering the case of diversified firms within a developing/transition country such as Vietnam, this paper investigates diversification relatedness while taking into account both firm- and industry-specific components. The high volatility dynamics observed in Vietnam suggests hypothesis that decide to enter new industries following trial error process, initiated by boundedly rational herding behaviors, i.e., follow most commonly business combinations. Using survivor-based (SB) measure relatedness, we test behavior. We find probability exit different performance measures (Return on sales Total factor productivity) are not or negatively correlated with SB-related diversification. This is contrast what has been developed countries. However, using SIC distance approach, obtain expected positive relationship between firms. conflicting result these two indices therefore there trend follow-up among inexperienced imitate direction intensity dominating players industry (herd behavior). gain experience over time choose more efficient combinations subsequent entries. When use classical SIC-based greater raises profitability, but only an optimum point, beyond which effect fades away. To control for endogeneity serial correlation terms, adopt instrumental-variable two-stage least-squares estimation approach (IV-2SLS) GMM treatment.