Industrial Diversification and Internationalization: Some Empirical Evidence

CONSIDERED in this paper is the proposition that exporting, foreign investment and domestic industrial diversification can be viewed as part of a single diversification strategy employed by American manufacturing firms which possess certain characteristics related to size and technical know-how. In the analysis, indices are constructed for the diversification options and are expressed as average propensities to undertake one or more forms of diversification. These serve as the dependent variables in a single least-squares regression estimation which uses cross-sectional data from the I96os for 95 U.S. manufacturing industries at the three-digit level. Data by industry rather than by firm are used because firm data are unavailable.' The independent variables are (i) the percentage of scientists and engineers in the ith industry as a percentage of total employment and (2) average size of firm in the ith industry.