The relationship between international diversification and firm performance: Why it remains a puzzle

Authors

  • Margarethe F. Wiersema,

    Corresponding author
    1. University of California, Irvine, The Paul Merage School of Business, Irvine, California, U.S.A.
    • University of California, Irvine, The Paul Merage School of Business, Irvine, CA 92697-3125, U.S.A.
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  • Harry P. Bowen

    1. Queens University of Charlotte, McColl School of Business, Charlotte, North Carolina, U.S.A.
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Abstract

Despite a wealth of empirical research, whether and how international diversification impacts firm performance remains one of the major unresolved research questions in the fields of strategy and international business. We propose that the lack of consensus about the nature of the international diversification–firm performance relationship results from a failure to fully grasp this complex phenomenon. Using data on trade flows of U.S. companies and their foreign subsidiaries, we provide a more focused and comprehensive perspective on the activities that define the geographic scope of U.S. companies that we hope will motivate a conceptualization of international diversification that encompasses the full range of activities that determine the geographic scope of a firm.

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