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

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  • Wiersema,Margarethe
  • Bowen, Harry P.

    ()
    (Vlerick Leuven Gent Management School)

Abstract

Significant reductions in barriers to international commerce since the mid-1970s have resulted in markets and industries becoming increasingly integrated across nations. A key consequence of industry globalization has been substantially increased levels of foreign competition in the markets of most nations, and in particular in the U.S. marketplace. The changes in competitive conditions facing firms as markets and industries become more globalized are significant economic phenomena that can be expected to impact corporate strategy in general, and corporate international diversification strategy in particular. Despite increasing global economic integration, the impact of industry globalization on corporate strategy is a question that has been largely overlooked in both the strategic management and international business literatures. This paper seeks to fill this important gap by examining the role of both environmental and firm specific factors in shaping a firm’s international diversification strategy. Specifically, we develop a theoretical framework for understanding how industry globalization, foreign competition, and firm product diversification would be expected to influence a firm’s strategic choice of its level of international diversification. We then empirically examine for the predicted impact and importance of these factors in a panel data set of U.S. firms from 1987 to 1993. Our study provides the first empirical examination and evidence that industry globalization and foreign-based competition are statistically significant factors explaining the increased international diversification of U.S. firms.

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Bibliographic Info

Paper provided by Vlerick Leuven Gent Management School in its series Vlerick Leuven Gent Management School Working Paper Series with number 2005-6.

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Length: 46 pages
Date of creation: 11 May 2005
Date of revision:
Handle: RePEc:vlg:vlgwps:2005-6

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Related research

Keywords: Corporate Strategy; Globalization; International Diversification Note;

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Cited by:
  1. Bowen, H. & Sleuwaegen, L., 2004. "European integration: the third step," Vlerick Leuven Gent Management School Working Paper Series 2004-19a, Vlerick Leuven Gent Management School.
  2. Alain Desreumaux, 2008. "Refaire de la stratégie?," Revue Finance Contrôle Stratégie, revues.org, vol. 11(Special), pages 67-107, June.
  3. Urbiztondo, Santiago & Bonardi , Jean-Philippe & Quelin , Bertrand V., 2012. "International Expansion, Diversification and Regulated Firm Nonmarket Strategy," Les Cahiers de Recherche 989, HEC Paris.
  4. Vanhaverbeke, Wim & Li, Ying & Van de Vrande, Vareska, 2009. "The dual role of external corporate venturing in technological exploration," MPRA Paper 26488, University Library of Munich, Germany, revised 2010.
  5. Ren� Belderbos & Leo Sleuwaegen & Reinhilde Veugelers, 2010. "Market Integration and Technological Leadership in Europe," European Economy - Economic Papers 403, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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