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Diversification and the failure of new foreign activities

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  • W. T. Bane
  • Franz‐Friedrich Neubauer

Abstract

The paper describes a quantitative investigation into the role of diversification in the failure of new foreign manufacturing activities based upon some of the results of the Harvard/CEI Comparative Multinational Enterprise Project. These results are related to the foreign subsidiaries of 69 of the largest continental European multinationals and show a considerable company‐to‐company spread in the rate of failure. Nearly half of this spread can be accounted for by the differing diversities of the companies when diversity is measured in relation to the marketing characteristics of the products manufactured and when the balance between the differing marketing categories is taken into account. The rate of foreign subsidiary expansion is also significant.

Suggested Citation

  • W. T. Bane & Franz‐Friedrich Neubauer, 1981. "Diversification and the failure of new foreign activities," Strategic Management Journal, Wiley Blackwell, vol. 2(3), pages 219-233, July.
    • Handle: RePEc:bla:stratm:v:2:y:1981:i:3:p:219-233
    DOI: 10.1002/smj.4250020302
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    Cited by:

    1. Hagen, James M. & Hennart, Jean-Francois, 2004. "Foreign Production: The Weak Link in Tests of the Internationalization Process Model," Working Papers 127789, Cornell University, Department of Applied Economics and Management.
    2. Ozkan, Kubilay S.L., 2020. "International market exit by firms: Misalignment of strategy with the foreign market risk environment," International Business Review, Elsevier, vol. 29(6).
    3. McCloughan, Patrick & Stone, Ian, 1998. "Life duration of foreign multinational subsidiaries: Evidence from UK northern manufacturing industry 1970-93," International Journal of Industrial Organization, Elsevier, vol. 16(6), pages 719-747, November.
    4. Ilaria Galavotti & Daniele Cerrato & Franca Cantoni, 2020. "Surviving after Cross-Border Acquisitions: How Business Relatedness, Host Country Experience, and Cultural Distance Affect Acquired Firms," Sustainability, MDPI, vol. 12(17), pages 1-18, August.
    5. Staffan Canback & Phillip Samouel & David Price, 2003. "Strategy and structure in interaction: What determines the boundaries of the firm?," Industrial Organization 0303003, University Library of Munich, Germany, revised 17 Mar 2003.
    6. Ryan W. Tang & Ying Zhu & Hongbo Cai & Jinrong Han, 2021. "De-internationalization: A Thematic Review and the Directions Forward," Management International Review, Springer, vol. 61(3), pages 267-312, June.
    7. Staffan Canback, 2004. "Diseconomies of scale in large corporations: Theory and empirical analysis," Industrial Organization 0402001, University Library of Munich, Germany.
    8. George Halkos & Nickolaos Tzeremes, 2010. "The effect of foreign ownership on SMEs performance: An efficiency analysis perspective," Journal of Productivity Analysis, Springer, vol. 34(2), pages 167-180, October.
    9. Schmid, David & Morschett, Dirk, 2020. "Decades of research on foreign subsidiary divestment: What do we really know about its antecedents?," International Business Review, Elsevier, vol. 29(4).

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