Corporate diversification: the impact of foreign competition, industry globalization, and product diversification

The globalization of markets and industries has fundamentally changed the competitive conditions facing firms. Yet, how globalization has influenced the international diversification strategies of firms is an issue largely overlooked in both the strategic management and international business literatures. This paper develops a theoretical framework to understand how industry globalization, foreign competition, and firm product diversification may influence a firm's choice of its degree and scope of international diversification. Utilizing a panel dataset of U.S. manufacturing firms for the period 1987–99, we provide the first empirical evidence that industry globalization and foreign-based competition are statistically significant factors explaining the degree and scope of international diversification by U.S. firms. Copyright © 2007 John Wiley & Sons, Ltd.

[1]  Mir A. Ferdowsi.  UNCTAD – United Nations Conference On Trade And Development , 2010 .

[2]  Margarethe F. Wiersema,et al.  Foreign-based competition and corporate diversification strategy , 2005 .

[3]  R. Grant.  Contemporary Strategy Analysis , 2005 .

[4]  L. G. Thomas.  Are we all global now? Local vs. foreign sources of corporate competence: the case of the Japanese pharmaceutical industry , 2004 .

[5]  P. Beamish,et al.  INTERNATIONAL DIVERSIFICATION AND FIRM PERFORMANCE: THE S-CURVE HYPOTHESIS , 2004 .

[6]  P. Ghauri,et al.  Globalisation, economic geography and the strategy of multinational enterprises , 2004 .

[7]  Joan V. Robinson,et al.  The Nature of the Firm , 2004 .

[8]  Margarethe F. Wiersema,et al.  Modelling limited dependent variables: methods and guidelines for researchers in strategic management , 2003 .

[9]  Paul W. Beamish,et al.  Geographic scope and multinational enterprise performance , 2003 .

[10]  D. Sethi,et al.  Trends in foreign direct investment flows: a theoretical and empirical analysis , 2003 .

[11]  M. Kotabe,et al.  The relationship between international diversification and performance in service firms , 2003 .

[12]  C. Ai,et al.  Interaction terms in logit and probit models , 2003 .

[13]  H. Grubel,et al.  Intra-Industry Trade , 2003 .

[14]  Larry H. P. Lang,et al.  Foreign direct investment, diversification and firm performance , 2003 .

[15]  Robert E. Hoskisson,et al.  Home country environments, corporate diversification strategies, and firm performance , 2003 .

[16]  David Hummels.  Have International Transportation Costs Declined , 2003 .

[17]  L. G. Thomas.  Are We All Global Now ? Local versus Foreign Sources of Corporate Competence : The Case of the Japanese Pharmaceutical Industry December , 2003 .

[18]  Peter K. Schott,et al.  Survival of the best fit: exposure to low-wage countries and the (uneven) growth of U.S. manufacturing plants , 2003 .

[19]  R. Hudson.  The Globalization of Business , 2002 .

[20]  Vivek Ghosal.  Potential foreign competition in US manufacturing , 2002 .

[21]  William J. Zeile.  U . S . Affiliates of Foreign Companies Operations in 1998 , .

[22]  J. Tybout.  Plant- and Firm-Level Evidence on "New" Trade Theories , 2001 .

[23]  Wilbur Chung.  Mode, Size, and Location of Foreign Direct Investments and Industry Markups , 2001 .

[24]  David J. Denis,et al.  Global Diversification, Industrial Diversification, and Firm Value , 2001 .

[25]  Wilbur Chung,et al.  Identifying Technology Transfer in Foreign Direct Investment: Influence of Industry Conditions and Investing Firm Motives , 2000 .

[26]  M. Munday,et al.  Industrial Performance, Agglomeration, and Foreign Manufacturing Investment in the UK , 2000 .

[27]  Stephen Tallman,et al.  PRODUCT AND INTERNATIONAL DIVERSIFICATION AMONG JAPANESE MULTINATIONAL FIRMS , 2000 .

[28]  Paul W. Beamish,et al.  Geographic Scope, Product Diversification and the Corporate Performance of Japanese Firms , 1999 .

[29]  Margarethe F. Wiersema,et al.  Matching method to paradigm in strategy research: limitations of cross‐sectional analysis and some methodological alternatives , 1999 .

[30]  David Hummels,et al.  The Nature and Growth of Vertical Specialization in World Trade , 1999 .

[31]  K. Sauvant.  World Investment Report , 1999 .

[32]  Mona V. Makhija,et al.  Measuring Globalization of Industries Using a National Industry Approach: Empirical Evidence Across Five Countries and over Time , 1997 .

[33]  Robert E. Hoskisson,et al.  International Diversification: Effects on Innovation and Firm Performance in Product-Diversified Firms , 1997 .

[34]  Stephen Tallman,et al.  Effects of International Diversity and Product Diversity on the Performance of Multinational Firms , 1996 .

[35]  Donald D. Bergh,et al.  Problems with Repeated Measures Analysis: Demonstration with A Study of the Diversification and Performance Relationship , 1995 .

[36]  J. Sachs,et al.  Economic Reform and the Process of Global Integration , 1995 .

[37]  Obie G. Whichard,et al.  An Ownership-Based Disaggregation of the U.S. Current Account, 1982-93 , 1995 .

[38]  George S. Yip,et al.  Exploiting globalization potential: U.S. and japanese strategies , 1994 .

[39]  Bruce C. Petersen,et al.  The Effect of Rising Import Competition on Market Power: A Panel Data Study of US Manufacturing , 1994 .

[40]  George S. Yip,et al.  EXPLOITING GLOBALIZATION POTENTIAL: U.S. , 1994 .

[41]  C. Coulton,et al.  Interaction Effects in Multiple Regression , 1993 .

[42]  Margaret A. Peteraf.  The cornerstones of competitive advantage: A resource‐based view , 1993 .

[43]  J. Dunning.  The globalization of business , 1993 .

[44]  A. Morrison,et al.  A TAXONOMY OF BUSINESS-LEVEL STRATEGIES IN GLOBAL INDUSTRIES , 1992 .

[45]  Joseph T. Mahoney,et al.  The resource-based view within the conversation of strategic management , 1992 .

[46]  F. Scherer,et al.  R&D Reactions To High-Technology Import Competition , 1992 .

[47]  正弘 中舘.  OECD (経済開発協力機構) : Organization for Economic Co-operation and Development , 1991 .

[48]  Stephen J. Kobrin,et al.  AN EMPIRICAL ANALYSIS OF THE DETERMINANTS OF GLOBAL INTEGRATION , 1991 .

[49]  J. Barney.  Firm Resources and Sustained Competitive Advantage , 1991 .

[50]  Vincent di Norcia.  Managing Across Borders: The Transnational Solution , 1991 .

[51]  Michael E. Porter,et al.  The Competitive Advantage of Nations. , 1990 .

[52]  Paul W. Beamish,et al.  DIVERSIFICATION STRATEGY AND INTERNATIONALIZATION: IMPLICATIONS FOR MNE PERFORMANCE , 1989 .

[53]  Peter Hwang,et al.  Global diversification strategy and corporate profit performance , 1989 .

[54]  Howard Thomas,et al.  DIVERSITY, DIVERSIFICATION, AND PROFITABILITY AMONG BRITISH MANUFACTURING COMPANIES, 1972-84 , 1988 .

[55]  Gareth R. Jones,et al.  Transaction cost analysis of strategy‐structure choice , 1988 .

[56]  S. Ghoshal.  Global strategy: An organizing framework , 1987 .

[57]  Robert M. Grant,et al.  Multinationality and Performance among British Manufacturing Companies , 1987 .

[58]  W. Dugger.  The Economic Institutions of Capitalism , 1987 .

[59]  R. Bühner,et al.  Assessing international diversification of West German corporations , 1987 .

[60]  Bart W. Stuck,et al.  A Computer and Communication Network Performance Analysis Primer (Prentice Hall, Englewood Cliffs, NJ, 1985; revised, 1987) , 1987, Int. CMG Conference.

[61]  Paolo Leon.  The Economic Institutions of Capitalism , 1986, The Antitrust Bulletin.

[62]  F. Meyer.  Market structure and foreign trade: increasing returns, imperfect competition, and the international economy , 1986 .

[63]  D. Teece.  TRANSACTIONS COST ECONOMICS AND THE MULTINATIONAL ENTERPRISE An Assessment , 1986 .

[64]  R. Glenn Hubbard,et al.  Business Cycles and the Relationship between Concentration and Price-Cost Margins , 1986 .

[65]  Michael E. Porter,et al.  Changing Patterns of International Competition , 1986 .

[66]  D. Greenaway,et al.  The economics of intra-industry trade , 1986 .

[67]  David J. Teece,et al.  Multinational Enterprise, Internal Governance, and Industrial Organization , 1985 .

[68]  Edward E. Leamer,et al.  Sources of International Comparative Advantage: Theory and Evidence. , 1985 .

[69]  B. Wernerfelt,et al.  A Resource-Based View of the Firm , 1984 .

[70]  R. Caves,et al.  Multinational Enterprise and Economic Analysis: Preface , 2007 .

[71]  Michael E. Porter,et al.  How Global Companies Win Out , 1982 .

[72]  David J. Teece,et al.  Towards an economic theory of the multiproduct firm , 1982 .

[73]  K. Maskus,et al.  Determinants of the structure of U.S. foreign trade, 1958–1976 , 1981 .

[74]  Simon Webley.  American Multinationals and American Interests , 1980 .

[75]  P. Krugman.  Scale Economies, Product Differentiation, and the Pattern of Trade , 1980 .

[76]  A. Rugman.  International diversification and the multinational enterprise , 1980 .

[77]  A. Jacquemin,et al.  Entropy Measure of Diversification and Corporate Growth , 1979 .

[78]  W. Diebold,et al.  American Multinationals and American Interests , 1978 .

[79]  Thomas A. Pugel.  International market linkages and U.S. manufacturing: Prices, profits, and patterns , 1978 .

[80]  R. Rumelt.  Strategy, structure, and economic performance , 1974 .

[81]  R. Caves.  Multinational Firms, Competition, and Productivity in Host-Country Markets , 1974 .

[82]  R. Caves.  International Corporations: The Industrial Economics of Foreign Investment , 1971 .

[83]  R. Baldwin.  Determinants of the Commodity Structure of U. S. Trade: Reply , 1971 .

[84]  L. Weiss,et al.  Factors in Changing Concentration , 1963 .

[85]  E. J. Mishan,et al.  Theories of Consumer's Behaviour: A Cynical View , 1961 .

[86]  E. Penrose.  The theory of the growth of the firm twenty-five years after , 1960 .

[87]  R. Coase.  Book Review (reviewing Terence H. O'Brien, British Experiments in Public Ownership and Control (1937)) , 1938 .

[88]  R. Coase.  The Nature of the Firm , 1937 .

[89]  B. Ohlin,et al.  Interregional and International Trade. , 1936 .