Ma. Hitt et al., INTERNATIONAL DIVERSIFICATION - EFFECTS ON INNOVATION AND FIRM PERFORMANCE IN PRODUCT-DIVERSIFIED FIRMS, Academy of Management journal, 40(4), 1997, pp. 767-798
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.