Geographic Scope, Product Diversification and the Corporate Performance of Japanese Firms
Strategic Management Journal, Vol. 20, 1999
Posted: 20 Jun 2002
This paper examines the relationships between geographic scope, product diversification and the corporate performance of Japanese multinational enterprises. The model developed and tested in this paper extends research on the geographic scope-performance relationship by exploring both the antecedents and consequences of geographic scope. We test our research model with data on the corporate performance of 399 Japanese manufacturing firms. The path analytic (Partial Least Squares (PLS)) approach taken in this study emphasizes the integrated nature of these relationships and points to the different performance outcomes as a firm undertakes investments in new product areas, in proprietary assets and in international markets. We find performance to be higher in more multinational firms. That is, geographic scope and proprietary assets, particularly in highly product diversified firms in Japan, has strong positive associations with the performance of Japanese firms. We find that geographic scope is positively related to firm profitability, even when controlling for the competing effect of the possession of proprietary assets. This finding demonstrates that expansion into new geographic markets was an effective strategy for improving the performance of Japanese firms in the 1990s.
Note: This is a description of the paper and not the actual abstract.
Keywords: FDI, Diversification, Multinationality, Performance, Japan, foreign investment
Suggested Citation: Suggested Citation