Name: Iqra

Class: BBA VIII B

013-19-0156
Title: The Effect of Ownership Concentration and Related Diversification Strategy of
Entrepreneurial Enterprises on Enterprise Performance
Link: https://www.ejmste.com/article/the-effect-of-ownership-concentration-and-related-
diversification-strategy-of-entrepreneurial-5193

Summary:
In a research study article titled "The Effect of Ownership Concentration and Related Diversification
Strategy of Entrepreneurial Enterprises on Enterprise Performance," the effect of concentrated ownership
and related diversification strategy is investigated in connection with the performance of startup
companies.
According to the article, ownership concentration and the associated diversification strategy are two
important elements that might affect the success of entrepreneurial firms, which frequently confront
particular issues in terms of strategy and governance. While related diversification strategy refers to the
extent to which the enterprise diversifies into businesses that are related to its core activities, ownership
concentration refers to the degree to which ownership of the enterprise is concentrated in the hands of a
small number of individuals or groups.
The study indicates that ownership concentration has a detrimental effect on firm performance because it
can result in conflicts of interest, poor decision-making, and a lack of accountability. It does this by using
a sample of 198 entrepreneurial enterprises in China. The adverse impact is, however, mitigated when the
company implements a relevant diversification plan since it may foster synergies and lower the risks
connected to concentration in a particular industry.
A similar diversification strategy, which enables an organization to use its core talents and resources
across many companies and to seize opportunities in related markets, has also been found to have a
favorable effect on an organization's success. High levels of ownership concentration, however, might
restrict an organization's access to resources and knowledge from outside sources, which can mitigate the
good effect.
Ultimately, the article makes the case that ownership concentration and the associated diversification
strategy are two significant aspects that can affect how well entrepreneurial companies function and that a
balanced approach to both factors is required for long-term success. To avoid the negative consequences
of ownership concentration and to use their core expertise and resources across several firms,
entrepreneurial enterprises should specifically think about implementing a related diversification plan.