Factors Influencing Specialization vs. Diversification Decision Making

Abstract

This paper explores the role of various economical, financial, and strategic forces influencing firms towards diversification and specialization decision making within the Saudi Arabian manufacturing industry. Surveying 100 decision makers in the industrial cities of Riyadh using questionnaires developed for both groups, the study attempts to identify the factors that had the greatest impact on firm performance based on firm returns on investment. Several factors were found significant; first, attempts of specialization were found associated with risk avoidance and managers craving to achieve industry dominant economic features, whilst results show an increased concern among diversified firm decision makers towards changes in import and export policies and regulations. Moreover, industry type was found effective in managerial responses as they weigh the role of the factors presented to the direction of the expansion made.