The Impact of SMEs’ New Business Entry Strategies on the Level of Diversification

Purpose: The The purpose of this study is to identify the determinants of diversification strategies among the management strategies of small and medium-sized enterprises. Recently, the internal and external environments that companies face are changing very rapidly, and accordingly, the importance of flexible management strategies according to these environmental changes is increasing. Therefore, this study aims to provide meaningful implications for the diversification strategies of small and medium-sized enterprises after conducting an empirical analysis of the level of diversification of small and medium-sized enterprises.Research design, data, and methodology: Among a total of 13,144 companies, 6,288 manufacturing companies were extracted, and among 6,194 small and medium-sized companies, 5,988 companies were extracted as the final analysis subjects after excluding small and medium-sized companies that removed identifiable information. For each item, the stages of entry were extracted as idea planning, R&D stage, facility construction stage, and sales stage, and the types of entry were extracted as acquisition, joint investment, and self-development, and the presence or absence of strategic alliance between companies was extracted.Results: First, the level of corporate diversification increases as the stage of SMEs’ new business entry becomes more sophisticated. Second, the level of business diversification increases when the type of new business entry of SMEs is acquisition rather than self-development. Third, the level of business diversification increases in companies that are in a strategic alliance with other companies compared to companies that are not. Implications: This study suggested that the ability to internalize external capabilities is important for business diversification of small and medium-sized enterprises, and that internal capabilities can be effectively utilized through strategic alliances between companies.