Geographic scope, product diversification, and the corporate performance of Japanese firms

The study extends research on the geographic scope, product diversification , and performance relationship by exploring both the antecedents and conseq uences of geographic scope. In so doing, it addresses a fundamental critici sm of the geographic scope-performance relationship; namely, that the obser ved positive relationship between geographic scope and performance is spuri ous because it is the possession of proprietary assets that is the foundati on of superior performance, not expansion into international markets per se . We tested the research model with data on the corporate performance of 39 9 Japanese manufacturing firms. In the partial least squares analyses used to examine the study's six main hypotheses, we demonstrate that geographic scope was positively associated with firm profitability, even when the comp eting effect of proprietary assets on firm performance was considered. Furt her, we find that performance was not related to the extent of product dive rsification, although investment levels in rent-generating, proprietary ass ets were related to the extent of product diversification Copyright (C) 199 9 John Wiley & Sons, Ltd.