Macro-Competitive Context and Diversification: The Impact of Macroeconomic Growth and Foreign Competition

Abstract

This longitudinal study of large European firms (1993-2007) offers a conceptual model that explains how two key aspects of the macro-competitive environment, macroeconomic growth and foreign competition, shape product and international diversification. The results indicate that greater foreign competition reduces product diversification but fosters international diversification, while macroeconomic growth has a positive impact on product diversification and a negative one on international diversification. These findings suggest that managers have to set economy-wide, macro-competitive conditions alongside firm and industry-level considerations when making diversification strategy choices.

Keywords: diversification, internationalisation, macroeconomic growth, foreign competition

JEL Classification: D21, F23