Corporate strategic decisions regarding the international and product market scope of a firm's activities are the essence of corporate strategy, and how these choices in turn affect performance is the subject of a large body of research in the fields of international business and strategic management. When making these strategic decisions, managers are likely to take into account that these decisions are interrelated since they will require allocating a firm's fixed bundle of resources. Yet, the international business and strategy literatures have mostly treated these two scope decisions as independent strategies, and have also largely ignored the interrelated nature of these strategic scope decisions vis-à-vis their expected impact on performance. As a result, little is known about the nature of the relationship between these strategic choices - whether they are substitute or complementary strategies - or how they jointly impact firm performance. To address this important gap in our understanding of corporate strategy, this paper examines the joint and simultaneous nature of the relationships among these strategic scope decisions and firm performance in a unified framework. Our analysis serves to integrate prior international business and strategy research, and our model and empirical methods address a number of shortcomings of prior empirical studies. Our results indicate that the relationship between a firm's international and product market strategies and its performance is nonlinear, with performance first rising but then falling as the firm's international or product diversification rises, implying that the performance impact of these strategies is path dependent. Our results also provide the first evidence that, within the firm, international and product diversification are substitute strategies for performance. Keywords: Corporate Strategy, International Diversification, Product Diversification
The globalization of industries over the past two decades has resulted in domestic markets facing increasing inroads by foreign competitors. Utilizing resource-based theory, this paper examines how increased foreign competition impacts a firm's diversification strategy. Building on the important role of a firm's core competences as the basis for sustainable competitive advantage, we postulate that increased foreign-based competition, as measured by the degree of import penetration in a firm's core business industry, will engender a defensive response by the firm to protect its core business. This defensive response will in turn lead the firm to focus on its core business at the expense of non-core business activities with a consequent reduction in the firm's level of diversification. In addition, we conjecture that this increased focus and reduction in diversification will be greater the more attractive is the firm's core business to the firm and the more attractive is the firm's core industry. Our empirical analysis is conducted using a unique panel data set of both diversified and undiversified U.S. firms over the period 1985-1994. The special nature of the data sample raises important methodological and statistical issues which are addressed here by the use of a nonlinear TOBIT procedure. Our results indicate strong support for the hypothesized negative relationship between firm diversification and foreign-based competition. Moreover, we find significant evidence that this negative relationship is moderated by the attractiveness of a firm's core business industry, the profitability of the firm's core business and overall firm performance. These findings lend support to the resource-based theory of the firm and they suggest that the observed trend in corporate refocusing over the last decade has, to a significant extent, been driven by increased foreign-based competition.
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. Keywords: Corporate Strategy, Globalization, International Diversification
Since the early 1970s, Socially Responsible Investment (SRI) has grown from a curiosity and niche-market phenomenon in the financial world to become a global movement, which is embraced now in most countries around the world. The paper focuses on the development and practices of SRI in the United States and Europe. The aim is to explore the historical, cultural and political embeddedness of SRI. Based on second sources of information, it offers a comparative analysis of the development and current practices of SRI on both sides of the Atlantic and discusses the future trends for SRI. The paper shows that SRI movements in both regions present some differences in terms of definitions, actors involved, vocabulary and motivations, and strategies implemented. However, they also share a common underlying purpose and seeking similar goals of improving corporations' policies and practices on social and environmental issues. Key words: Socially Responsible Investment, Europe, United States
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