Foreign diversification vs concentration strategies and firm performance

Abstract

Purpose -The purpose of this study is to examine the impact on firm performance of foreign concentration vs diversification strategies, as well as the moderating role played by market, product and firm characteristics. Design/methodology/approach -Moderated regression analysis is used. Findings -Distribution and cultural distance (CU) moderate the relationship between foreign concentration-diversification and stock market performance; while the non-repetitive character of product purchase moderates the relationship at an accounting performance level. Research limitations/implications -First, the lack of information prevented us from examining other groups of determining factors. Second, the possible existence of bias in the results due to the selection of stock market quoted firms. Practical implications -Managers must realise that CU, distribution channel, and the product factor of non-repeat purchase, play an important role in the choice of a concentration vs diversification strategy when explaining business results. Government authorities should develop training programmes for firms located in middle-income countries in order to detect the CU with target markets, as well as the development of effective distribution channels and of product strategy in these markets. Originality/value -The findings of this study and the implications proposed show the relevance of this topic. The paper focuses on a middle-income country (Spain) and uses two measurements of firm performance: an accounting rate and a market measure based on the event-study (excess returns on the stock market generated by the announcement of a foreign expansion).

Geographic export diversification: Determinants and their link with export performance

“…Though the foreign‐expansion strategy is a determinant of XP, empirical studies that have tested this relationship have confirmed what is questionable about the options considered (L. E. Brouthers & Nakos, ; Katsikea et al, ;Lee & Yang, ; Mas et al, ; Ruzo et al, ). A firm's export‐market expansion strategy may be considered a determining factor of its XP, but there is neither theoretical nor empirical consensus as to which type of strategy results in a better XP (Lee & Yang, ).…”

“…Depending on the number of markets where a firm is looking to establish its presence, two alternative strategies have been identified and discussed: concentration and diversification (e.g., Ayal & Zif, ; Lee & Yang, ; Losada, Ruzo, Barreiro, & Navarro, ; Mas, Nicolau, & Ruiz, ), which are also referred to as concentration and dispersion/spreading (e.g., Crick, Chaudhry, & Bastone, ; Katsikea, Theodosiou, Morgan, & Papavassiliou, ; Katsikeas & Leonidou, ; Piercy, ).…”

“…Other findings suggest the value of advertising intensity depreciates when applied to multiple markets, and the exploitation of these assets does not necessarily enhance the performance scope of their use in the same firm (Kirca et al, 2011). Furthermore, a number of studies include the degree to which firms adapt their communication as a distinguishing factor in relation to export‐market expansion strategies (Ayal & Zif, ; Katsikea et al, ; Mas et al, ; Piercy, ). In any event, we proposed the following:Hypothesis Greater investment in communication activities is likely to lead to greater export‐market diversification.…”

The Effect of Internet Channels on the Market Value: AR and EVA Perspectives

“…Due to its strength, event study has been well accepted and widely employed in a variety of disciplines (Agrawal & Kamakura, 1995). Examples of the event study application on management include market expansion strategy (Mas, Nicolau, & Ruiz, 2006), celebrity endorsements (Agrawal & Kamakura, 1995), strategic alliances (Kalaignanam, Shankar, & Varadarajan, 2007), IT investments (Meng & Lee, 2007), electronic commerce announcement (Subramani & Walden, 2001;Dewan & Ren, 2007) and Internet channel additions (Geyskens et al, 2002). To elaborate, Lin, Jang, and Chen (2007) apply the event study methodology to assess the market value of e-service initiatives.…”

As capacidades dinâmicas para a inovação e os padrões de internacionalização de empresas de base tecnológica: um estudo de casos múltiplos com PMEs brasileiras

“…However, as there are other sequential forms of exporting without necessarily obey this linearity, the innovation-related models have a limited explanatory power (Andersen, 1993). There are different types of international starters with different background, knowledge about international operations and sources of information that aim other exporting patterns apart of the evolutionary pattern (Kuivalainen et al, 2012;Kuivalainen et al, 2007;Mas et al, 2006). Besides considering internal decisions and changes in the organizational structure, managers have to consider the organizational context, as there are variables such as government incentives, the economic integration, the possibility of participating in international networks and the request of the company's products and services by unknown foreign customers that influence the internationalization process (Crick & Chaudhry, 1997).…”