Optimal Business Diversification and Firm Performance: The Role of Geographic Diversification in Chinese Tourism Firms

This study aims to examine the relationship between business segment diversification and firms’ performance as well as the moderating role of the geographic diversification in the context of Chinese tourism industry. The analysis is based on data from annual reports of Chinese tourism firms over 8 years. This study affirms an inverted U-shape relationship and suggests the optimal level of business segment diversification to Chinese tourism firm performance. The positive effect of business segment diversification on Chinese tourism firm performance was supported in the group of firms with geographic diversification and was not supported in the group of firms without geographic diversification. The application of optimal business segment diversification and implications for Chinese tourism industry are discussed as well.