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Balancing growth across geographic diversification and product diversification: A contingency approach

  • Hashai, Niron
  • Delios, Andrew
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    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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    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 21 (2012)
    Issue (Month): 6 ()
    Pages: 1052-1064

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    Handle: RePEc:eee:iburev:v:21:y:2012:i:6:p:1052-1064
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    1. Mudambi, R. & Mudambi, S. M., 2002. "Diversification and market entry choices in the context of foreign direct investment," International Business Review, Elsevier, vol. 11(1), pages 35-55, February.
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