Balancing growth across geographic diversification and product diversification: A contingency approach |
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| Authors: | Niron Hashai Andrew Delios |
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| Affiliation: | 1. Jerusalem School of Business Administration, The Hebrew University, Mount Scopus, Jerusalem 91905, Israel;2. Department of Business Policy, National University of Singapore, 1 Business Link, 117592, Republic of Singapore;1. Departamento de Dirección General y Estrategia, ESADE Business School, Universidad Ramon Llull, Avenida de la Torre Blanca, 59 Sant Cugat 08172, Spain;2. Departamento de Administración, Facultad de Administración y Economía, Universidad de Santiago de Chile, Avenida Libertador Bernardo O’Higgins 3363, Estación Central, Santiago, Chile;3. Facultad de Economía y Negocios, Universidad Andrés Bello, Fernández Concha 700, Las Condes, Santiago de Chile, Chile;1. Manchester Metropolitan University, United Kingdom;2. Uppsala University, Sweden;3. University of Richmond, United States;1. Department of Management and Global Business, Rutgers Business School – Newark and New Brunswick, 1 Washington Park, Newark, NJ 07102, United States;2. School of Business, Rutgers University, 227 Penn Street, Camden, NJ 08102-1656, United States;3. Discipline of International Business, University of Sydney Business School, United States;1. CIRCLE, Lund University, Sweden;2. URU, Utrecht University, The Netherlands;3. Institute for Advanced Studies, IUSS, Pavia, Italy |
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| Abstract: | We theorize that firms simultaneously seek to balance their growth across both the geographic and product diversification domains. To achieve this balance, businesses commonly adopt a strategy of expanding an under-diversified direction at the expense of an over-diversified one. Accordingly, we depict geographic diversification and product diversification as being an endogenous relationship, from which we hypothesize that firms that have under-diversified in a given direction and over-diversified in the other will expand the former at the expense of the latter. Meanwhile, firms that have under-diversified in both directions will expand both diversification paths, while firms that have over-diversified in both directions will contract in both diversification routes. We investigate these predicted relationships and show them empirically using a sample of leading Japanese multinationals in the 1990–2000 period. |
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