The relationship between product and international diversification: the effects of short-run constraints and endogeneity
Article first published online: 10 NOV 2008
Copyright © 2008 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 30, Issue 1, pages 99–116, January 2009
How to Cite
Kumar, M.V. S. (2009), The relationship between product and international diversification: the effects of short-run constraints and endogeneity. Strat. Mgmt. J., 30: 99–116. doi: 10.1002/smj.724
- Issue published online: 14 NOV 2008
- Article first published online: 10 NOV 2008
- Manuscript Revised: 8 JUL 2008
- Manuscript Received: 4 OCT 2006
- endogenous growth;
- corporate strategy;
- international expansion;
- resource-based view
We examine the relationship between growth along the product and international dimension in the short run. We argue that while the presence of fungible intangible resources and economies of scope may create opportunities for a firm to expand along both dimensions, the effect of short- run constraints may lead to a trade-off and a negative association between the two dimensions. In addition, we suggest that rather than being independent, decisions concerning the extent of growth along the two dimensions are likely to be made simultaneously and endogenously by firms after taking into consideration the availability of various resources. We test these propositions by observing a sample of 1,299 firms over the period of 1993–1997. Our results show strong evidence of endogeneity and a negative association between growth along the two dimensions. These findings provide important support for theories of firm growth that have long held that firms are limited in the number of opportunities they can exploit in the short run by various constraints. Copyright © 2008 John Wiley & Sons, Ltd.