Journal Article

The performance implications of intra- and inter-regional geographic diversification

Qian, Gongming, Qian, Zhengming, Peng, Mike W., Khoury, Theodore A.

2010

Overview

Engaging the debate regarding the appropriate level of geographic diversification for multinational enterprises (MNEs), we examine a critical, yet unresolved, question: How is performance impacted by the MNE's level of intra-and inter-regional diversification versus the total level of geographic diversification? Using data from 123 U.S.-based MNEs over a seven-year period and leveraging both sales-based and subsidiary-based measures for diversification, we find that performance increases at an increasingly higher rate as firms concentrate more heavily on intra-regional diversification. Regarding inter-regional diversification and total geographic diversification, we find inverted-U relationships to exist between firm performance and the level of geographic diversification. Different from recent research on multinationality, our robustness checks indicate no evidence of a sigmoidal relationship between the degree of regional diversification and performance.

• Publisher: John Wiley & Sons, Ltd,John Wiley & Sons,Wiley,Wiley Periodicals Inc
• Subject: Business structures / Corporate strategies / Countries / Diversification / Economic theory / Experiments / Financial investments / Financial performance / geographic diversification / Geographic location / Geographic regions / geographic spread / Gross domestic product / Industrial products / Industry / MNE / Multinational corporations / multinational enterprise strategy / Multinational enterprises / multinationality performance / Organizational effectiveness / Organizational performance / Product diversification / regionalization / Regions / RESEARCH NOTES AND COMMENTARIES / Robustness / Sales / Signatures / Strategic management / Studies / U.S.A