INTERNATIONAL DIVERSIFICATION - EFFECTS ON INNOVATION AND FIRM PERFORMANCE IN PRODUCT-DIVERSIFIED FIRMS

Theory suggests and results show that firm performance is initially po sitive but eventually levels off and becomes negative as international diversification increases. Product diversification moderates the rela tionship between international diversification and performance. Intern ational diversification is negatively related to performance in nondiv ersified firms, positively related in highly product-diversified firms , and curvilinearly related in moderately product-diversified firms. I nternational diversification is also positively related to R&D intensi ty, but the interaction effects with product diversification are negat ive. The results of this study provide evidence of the importance of i nternational diversification for competitive advantage but also sugges t the complexities of implementing it to achieve these advantages in p roduct-diversified firms.