Foreign-based competition and corporate diversification strategy
Article first published online: 25 OCT 2005
Copyright © 2005 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 26, Issue 12, pages 1153–1171, December 2005
How to Cite
Bowen, H. P. and Wiersema, M. F. (2005), Foreign-based competition and corporate diversification strategy. Strat. Mgmt. J., 26: 1153–1171. doi: 10.1002/smj.499
- Issue published online: 25 OCT 2005
- Article first published online: 25 OCT 2005
- Manuscript Revised: 31 MAY 2004
- Manuscript Received: 22 AUG 2003
- foreign competition;
- corporate strategy
Since the mid-1980s U.S. domestic firms have faced significant increases in foreign-based (i.e., import) competition as reductions in barriers to international commerce have resulted in markets and industries becoming increasingly global. Despite the growing and widespread importance of foreign-based competition, the influence that such competition may exert on corporate diversification strategy is a question largely overlooked in the strategic management literature. This paper examines the impact of foreign-based competition in a firm's core business on both the level and nature of a firm's diversification strategy at the corporate level in a panel dataset of U.S. firms over the period 1985–94. Our findings provide the first evidence that increased foreign-based competition is indeed a statistically significant factor explaining both the reduced business-level diversity and the increased strategic focus of U.S. firms that has been widely perceived over the past two decades. Copyright © 2005 John Wiley & Sons, Ltd.