The Relationship Between International Diversification And Firm Performance

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impact on firm performance (Chandler, 1962; Ansoff, 1965; Rugman et al., 2011; Verbeke, 2012). Such performance is based on a firm’s ability to exploit foreign market opportunities and imperfections through internalisation.
Numerous studies have examined the relationship between international diversification and firm performance, but these studies have only provided evidence of conflicting outcomes (Lu & Beamish, 2004; Thomas & Eden, 2004). Subsequently, this has prompted research that focused on potential theoretical reasons as to why there are inconsistent findings or a lack of. These studies have shed some light on the basis that a curvilinear relationship is centrefold between international diversification and firm performance as opposed
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Some studies suggest that international diversification offers prospective market opportunities which give firms the opportunity for greater growth (Buhner, 1987), while other studies argue that international diversification has been grounded on the theoretical assumption that firms exploit the benefits of internationalisation in international markets (Rugman et al., 2011; Verbeke, 2012). The benefits of market internalisation are suggested to be economies of scale, scope and learning (Kogut, 1985) as well as sharing core competencies within different business segments and international markets (Porter, 1990; Hamel,…show more content…
Despite several studies agreeing on a positive relationship, other studies have opposed this idea and shown either a negative relationship or no relationship whatsoever (Siddhartan & Lall, 1982; Kumar, 1984). Critically, the studies that favour the relationship between international diversification and firm performance as linear have only been thought so under formal assumption (Thomas & Eden,

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