Dynamic Effects of Product Diversity, International Scope and Keiretsu Membership on the Performance of Japan's Textile Firms in the 1990s

Abstract

This paper examines how product diversity, international scope and group membership have affected economic performance in Japanese textile firms since the early 1990s. Through statistical approaches employing cross-sectional time-series data, the study attempts to explore the long-term effectiveness of various business models adopted by the companies. The results indicate that technology investment and related-product diversification are favorably associated with profitability, even in a mature industry, although domain commitment to textiles with the sequence of processing stages has not generated long-lasting yields. Marketing-centered entry into growing but unrelated markets has also proven unsuccessful, as has international diversification. The findings show insignificant performance effects of product diversity from increasing international expansion. The outcomes also suggest that shihon keiretsu membership seems to reduce international diversity in member firms, while not being a significant predictor of particular types of product diversity. Such keiretsu affiliation shows no direct impact on profitability, but weakly moderates the effects of export sales on performance. Main-bank relationships (yushi keiretsu) do not significantly influence a firm's financial outcomes.